Alexander Vinnik has pleaded guilty today to conspiracy to commit money laundering related to his role in operating the cryptocurrency exchange BTC-e, which was one of the world’s largest, from 2011 to 2017.
The Russian national operated BTC-e with the intent to promote unlawful activities and was responsible for a loss amount of at least $121 million, the DoJ stated as it revealed that BTC-e was one of the primary ways by which cyber criminals around the world transferred, laundered, and stored the criminal proceeds of their illegal activities.
BTC-e received criminal proceeds of numerous computer intrusions and hacking incidents, ransomware attacks, identity theft schemes, corrupt public officials, and narcotics distribution rings.
BTC-e processed over $9 billion in crypto
BTC-e processed over $9 billion-worth of transactions and served over one million users worldwide, including numerous customers in the United States, from until until it was shut down by law enforcement in or around July 2017 contemporaneous with Vinnik’s arrest.
Deputy Attorney General Lisa Monaco, said: “Today’s result shows how the Justice Department, working with international partners, reaches across the globe to combat cryptocrime. This guilty plea reflects the Department’s ongoing commitment to use all tools to fight money laundering, police crypto markets, and recover restitution for victims.”
Not only BTC-e was not registered as a money services business with the FinCEN despite doing business in the United States, but it also had no AML/KYC processes in place.
BTC-e collected virtually no customer data at all, which made the exchange attractive to those who desired to conceal criminal proceeds from law enforcement, and relied on shell companies and affiliate entities that were similarly unregistered with FinCEN and lacked basic AML/KYC policies to transfer fiat currency in and out of BTC-e. Vinnik set up numerous such shell companies and financial accounts across the globe to allow BTC-e to conduct its business. A court judge will soon determine his sentence.
In 2017, FinCEN assessed an approximately $110 million civil money penalty against BTC-e for willfully violating U.S. AML laws, and a $12 million civil penalty against Vinnik.
BTC-e co-founder Alexey Bilyuchenko allegedly hacked Mt. Gox
Last year, the DoJ charged BTC-e co-founder Alexey Bilyuchenko for his alleged role in the 2011 hack of the cryptocurrency exchange Mt. Gox. The Russian national were charged with conspiring to launder approximately 647,000 bitcoins from the hack of Mt. Gox. Bilyuchenko is also charged with conspiring with Alexander Vinnik to operate BTC-e from 2011 to 2017.
According to the complaint, Bilyuchenko and co-conspirator Aleksandr Verner gained unauthorized access to the server holding the cryptocurrency wallets for Mt. Gox, which was the largest Bitcoin exchange in existence at the time and stored the crypto wallets of thousands of users worldwide and the corresponding private keys used to authorize bitcoin transfers from those wallets, on a computer server in Japan.
Through the unauthorized access to Mt. Gox’s server, from September 2011 through at least May 2014, the defendants transferred at least approximately 647,000 bitcoins from Mt. Gox’s wallets to Bitcoin addresses controlled by Bilyuchenko, Verner, and their co-conspirators.
The DoJ also claimed that, in furtherance of the money laundering scheme, the defendants negotiated and entered into a fraudulent contract to provide purported advertising services to a Bitcoin brokerage service based in the Southern District of New York to conceal and liquidate the bitcoins stolen from Mt. Gox.
Bilyuchenko and Verner allegedly made regular requests to the owner and operator of the New York Bitcoin Broker to make large wire transfers into various offshore bank accounts, including in the names of shell corporations, controlled by Bilyuchenko, Verner, and their co-conspirators, court documents allege.
The unnamed New York Bitcoin Broker allegedly transferred more than approximately $6.6 million to overseas bank accounts controlled by Bilyuchenko, Verner, and their co-conspirators, said the DoJ, adding that in return the broker allegedly received “credit” on an exchange through which the Mt. Gox hackers laundered more than 300,000 of the bitcoins stolen from Mt. Gox.
