Man Allegedly Behind $4 Billion Bitcoin Laundering Scheme, Charged

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Money Laundering on computer keyboard
Alexander Vinnik, the orchestrator of a major Bitcoin money-laundering operation, is facing multiple charges in U.S. courts.

The Russian man who orchestrated a major money laundering operation involving Bitcoin has been arrested by the United States and Greek authorities.

Earlier, a U.S. court indicated that the mastermind, Alexander Vinnik, was the owner and operator of a digital currency platform used to launder over $4 billion for people involved in various criminal activities including computer hacking and drug trafficking.

BTC-e Bitcoin Laundering Scheme

The BTC-e operator was arrested in Greece, where he was staying in a small beach village hotel, following an investigation led by the U.S. Department of Justice in collaboration with several other task forces and federal agencies.

According to the indictment, Bitcoins stolen from other platforms were funneled through BTC-e to hide their source.

The statement further continued to say that BTC-e received Bitcoins from the Mt. Gox exchange before it was confiscated in 2014.

The authorities believe that Vinnik used his site to initiate business transactions in the U.S. without following the appropriate regulations.

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The platform was mostly used to help launder money for users involved in criminal activities.

After first launching in 2011, BTC-e grew to become one of the largest Bitcoin trading platforms worldwide.

However, BTC-e had been implicated in multiple criminal incidences.

In fact, U.S. authorities believe most of its money came from fraud, identity theft, computer hacking, tax refund fraud, drug trafficking and public corruption, among others.

Connection with Mt.Gox Failure

According to U.S. authorities, Vinnik received theft funds directly from Mt. Gox, which he laundered through BTC-e and Tradehill, another cryptocurrency platform he owned.

Mt. Gox was a Japanese-based Bitcoin exchange platform that was hacked in 2014.

According to the police, the coins stolen from the site were laundered by Vinnik, and a small fraction was said to be funneled back through Mt. Gox.

Although the Mt. Gox hack was massive in nature, attackers managed to steal only a fraction of the coins that had been laundered through BTC-e.

The indictment does not clarify whether the $4 billion is based on the current value of Bitcoin or its value during the time of transfer.

Transactions with U.S Entities

BTC-e is not based in the U.S., but authorities in the country did conduct the operation that led to Vinnik’s arrest.

According to authorities, the U.S.’s involvement is driven by the fact that Vinnik was using his platform to conduct illegal business deals with entities in the country.

All the businesses transactions were carried out without following the appropriate protocols that protect against money laundering and other crimes.

Some of the items that were confiscated in Vinnik’s hotel room include:
• Two tablets
• Two laptops
• Four credit cards
• One camera
• Five mobile phones
• One router

Vinnik’s arrest is the latest in a series of operations led by the U.S. authorities against Russian cyber crimes across Europe.

Earlier in July, U.S authorities successfully shut down the highly popular dark web market AlphaBay.

These prosecutions come after U.S. intelligence entities determined that Russian state hackers interfered with the 2016 general elections in the U.S. However, Moscow has refuted these claims.

Charges against Vinnik

male hands with dollars banknotes in handcuffs
he is facing charges for illegal monetary transactions

Vinnik is facing charges for two illegal monetary transactions and 17 counts of money laundering.

His charges also address running illegal money transfer services through BTC-e under his holding company, Canton Business Corp.

According to filings, U.S. authorities have issued Vinnika fine of $12 million, and his Bitcoin platform faces $110 million in charges from FinCEN.

In case he is convicted of the crimes, Vinnik faces a sentence of 55 years in U.S. federal prison.

A statement from the case’s prosecutors said BTC-e is one of the murkiest exchange platforms preferred by criminals—especially those who engage in online criminal activities.

BTC-e was embracing a Bitcoin laundering scheme instead of preventing it.

To make an account on the platform, the only information the site asked from customers was a name, an email address and a password.

The platform’s user chat was also actively used by users to openly discuss criminal activities while the customer services team would advise users on how to process and access money obtained from illegal transactions carried out via the dark web.

What’s Next?

It is unclear what will happen next in this case, with regards to Vinnik’s charges and the future of his platform.

But for now, the BTC-e site displays a message that the domain has been seized in a warrant part of a joint law enforcement operation by the U.S. Department of Justice, the Internal Revenue Service, Homeland Security Investigations, and other such federal authorities.

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  1. Anonymous

    You have to be kidding. BTC-e was a very solid exchange for thousands of small traders not interesting in any shady business, just crypto trading. By far mostly honest traders that have been sick of all the paperwork and surveillance on “legit” exchanges. Their support had a bit rough manners but beside that was really supportive and fast in response. The trollbox was awesome source of information about the crypto in general (well, also heavy in trolling but I have never seen any serious criminal instructions there in years). This exchange was fair, fun and people liked it. Now, FBI came and robbed all these small traders that did no harm. That really sucks.


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