BTC-e Operator Indicted and Connected With Missing Mt Gox Funds

According to a report revealed by the U.S. Department of Justice, formal charges against Alexander Vinnik are waiting for him on American soil. It seems Vinnik has many money laundering related charges against him and the exchange he allegedly operated — the long standing bitcoin exchange called BTC-e.

Also Read: Greek Authorities Arrest Suspected BTC-e Mastermind

‘BTC-e Was the Principal Means By Which Cyber Criminals Laundered Proceeds from Illicit Activity’

The U.S. Department of Justice (DOJ) believes the Russian native, Alexander Vinnik, and the exchange BTC-e laundered billions of dollars worth of bitcoin since 2011. The indictment details that “BTC-e was an exchange used for criminals worldwide” and Vinnik used this tool to liquidate bitcoin into U.S. dollars, Rubles, and Euros.

Vinnik was arrested on July 26, and according to DOJ the exchange operator allowed money from ransomware funnel through BTC-e, as well as hacking incidents, tax fraud, and drug trafficking money.

“BTC-e was an international money-laundering scheme that, by virtue of its business model, catered to criminals — and to cyber criminals in particular,” explains the DOJ’s charges. Through Vinnik’s efforts, BTC-e emerged as one of the principal means by which cyber criminals around the world laundered the proceeds of their illicit activity.”

The indictment describes Alexander Vinnik, 37, a Russian citizen, as the owner and operator of multiple BTC-e accounts, including administrator accounts, and also a primary beneficial owner of BTC-e’s managing shell company, Canton Business Corporation.

Alleged BTC-e Operator Faces 17 Counts of Money Laundering Charges

Vinnick has seventeen counts of money laundering and two charges of operating a business that facilitates unlawful monetary transactions. Further, the DOJ indictment also states BTC-e accounts “received substantial proceeds” from the hacked Mt Gox exchange. Additionally, the exchange netted funds from one of the biggest ransomware attacks called “Cryptowall.”

“Cryptocurrencies such as bitcoin provide people around the world new and innovative ways of engaging in legitimate commerce. As this case demonstrates, however, just as new computer technologies continue to change the way we engage each other and experience the world, so too will criminals subvert these new technologies to serve their own nefarious purposes,” said U.S. Attorney Brian J. Stretch for the Northern District of California.

This office will continue to devote the necessary resources to ensure that money launderers and cyber-criminals are detected, apprehended, and brought to justice wherever and however they use the internet to commit their crimes.

The paperwork further states that despite the fact that BTC-e was not registered as “money service” in the U.S. with Fincen (financial crimes enforcement network), it did a “substantial” amount of business in the country. BTC-e relied on “shell companies” says the indictment and most of these affiliated businesses were also not registered with Fincen. These companies clearly disregarded the “Know Your Customer” and anti-money laundering policies explains the DOJ. The report also reveals that BTC-e facilitated money laundering services for the two rogue Silk Road-related officers Carl Force and Shaun Bridges.

The ‘Vamnedam’ account

The substantial proceeds stemming from the Mt Gox hack was approximately 300,000 BTC (US$765M) according to the DOJ indictments, and funds were deposited into BTC-e accounts named “Vamnedam, Grmbit, and Petr.” Vinnick along with “others” controlled the Vamnedam account and funneled funds into Bitstamp. The coins were then exchanged into fiat currency and sent to bank accounts in Latvia, and Cyprus.

The takedown of this large virtual currency exchange should send a strong message to cyber-criminals and other unregulated exchanges across the globe. ~ Chief Don Fort, IRS Criminal Investigation

Vinnick is facing over 55 years in prison for these crimes and could be extradited to the U.S. in the near future. The BTC-e exchange’s future operations are currently unknown, but the trading platform has been fined for approximately $110 million by the U.S. Attorney’s Office and the Criminal Division’s Computer Crime and Intellectual Property Section.

“The arrest of Alexander Vinnik is the result of a multi-national effort and clearly displays the benefits of global cooperation among US and international law enforcement,” added FBI Special Agent in charge Hess.

What do you think about the charges against Alexander Vinnik? Let us know what you think in the comments below.

Images via Shutterstock, U.S. Justice Dep Press Statement, and Pixabay.

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