Alleged Bitcoin Launderer Alexander Vinnick Being Sued for $100 Million by California DOJ

A man at the centre of an extradition tug of war between the US, France and his home country, Russia, is now being sued for $100 million USD by the California Department of Justice (DOJ).

Alexander Vinnick has been imprisoned in Greece since July 2017 when he was arrested in Thessaloniki by Greek police with assistance from American agents. He is wanted in the US, France, and Russia for allegedly committing or facilitating cybercrimes and/or fraud against citizens in those countries.

Vinnik is accused of running BTC-e, a now-notorious London-headquartered Bitcoin exchange that, among other things, allegedly processed bitcoins used by Russian intelligence to fund their attacks on the 2016 US presidential elections.

Victims of the notorious Mt Gox exchange hack also traced some of the $500 million USD in bitcoins stolen from Mt Gox users to accounts directly controlled by Vinnik.

As well, according to consulting/auditing firm PwC:

“BTC-e is known for its involvement in laundering approximately USD 4 billion and is responsible for cashing out 95% of all ransomware payments made from 2014 to 2017…”

The current case against Vinnick comes as America’s powerful Financial Crimes Enforcement Network (FinCEN), “seeks to enforce monetary penalties FinCEN assessed against BTC-e and Vinnik for alleged violations of the Bank Secrecy Act (BSA)…”

Vinnick has claimed in court appearances that his role at BTC-e was minor. But according to the DOJ:

“Vinnik, a Russian national, occupied a senior leadership position within BTC-e, controlled multiple BTC-e administrative accounts used to process BTC-e’s transactions, and participated in the direction and supervision of BTC-e’s operations and finances.”

Penalties against BTC-e and Vinnick were assessed in California around the same time as his arrest in Greece:

“On July 26, 2017, FinCEN assessed monetary penalties against BTC-e and Vinnik for violations of the BSA.  FinCEN assessed $12 million in penalties against Vinnick and $88,596,314 in penalties against BTC-e for BTC-e’s alleged willful violations of the BSA.  The civil complaint seeks to enforce the monetary penalties issued by FinCEN.”

FinCEN’s jurisdiction appears to stem from the agency’s determination that BTC-e, though, “…registered in Cyprus and/or the Seychelles…operated in…other jurisdictions, including the Northern District of California, and allowed its users to buy and sell bitcoin and other digital currencies anonymously through its web domain, btc-e.com.”

This latest case against Vinnick should give pause to any cryptocurrency exchange or wallet service that only recently began to scrupulously vet customers and flag suspicious transactions.

According to FinCEN:

“FinCEN’s fines (assessed in 2017) were based, in part, on BTC-e’s failure to have reasonable AML policies or procedures in place to prevent criminal activity on the digital currency exchange.”

As well:

“Under the BSA, an MSB must file a suspicious activity report (SAR) if it becomes aware of transactions that the MSB ‘knows, suspects, or has reason to suspect’ are suspicious where those transactions involve the MSB and aggregate to at least $2,000 in value.”

BTC-e’s endeavours appear to have been particularly flagrant, however:

“FinCEN’s penalties were assessed, in part, because BTC-e did not file SARs and instead received proceeds from ransomware schemes, transferred funds to and from known dark net marketplaces, and deposited funds stolen from other digital currency exchanges into BTC-e accounts that Vinnik controlled.”

Owner of WEX, Rebranded Crypto Exchange That May Have Processed Bitcoins for Russian Spies, Arrested in Italy

Dmitry Vasiliev, a 32-year old Russian who took over and rebranded the notorious BTC-e exchange when its alleged admin, Alexander Vinnick, was arrested in Greece in 2017, is now under arrest in Italy, the BBC reports.

Vasiliev rebranded BTC-e, “the largest Russian-language platform for the sale and purchase of cryptocurrency,” as WEX in 2017, and promised at the time to pay BTC-e’s outstanding debts.

Vasiliev reportedly graduated from St. Petersburg Polytechnic University, worked as a professional poker player, and in 2012, went to China to broker exports for CIS (former Soviet republic) countries.

He also reportedly provided testimony at one of Alexander Vinnik’s court appearances in Greece.

Vasiliev reportedly sold WEX in November 2018 to, “a former fighter of the self-proclaimed DNR Dmitry Khavchenko (AKA ‘Sailor’).”

“DNR” refers to the proposed “Donetsk People’s Republic” project, a militant separatist effort in Eastern Ukraine that receives military support from Russia.

At one point, Khavchenko wrote an article for the BBC’s Russian desk stating that prominent Russian Orthodox billionaire and reported supporter of the annexation of Crimea, Konstantin Malofeev, could defend Khavchenko against sanctions imposed on him by the West.

Malofeev, however, denied this and said he had no business connection with ‘Seaman’ and WEX.

BTC-e’s alleged admin Vinnick is by now a well-known among followers of cryptocurrency’s many intrigues.

Kim Nilsson, an investor who lost money in the $500 million USD/850 000 Bitcoin hack on early Bitcoin exchange Mt Gox, traced Bitcoins stolen from the exchange directly to wallet addresses controlled by Vinnick.

Vinnick is now accused of helping launder more than $4 billion USD in cryptocurrency proceeds of crime on BTC-e.

Bloomberg also reported in September that BTC-e may have processed Bitcoins for “Fancy Bear,” a Russian hacking team indicted by Robert Mueller in July for allegedly interfering in the 2016 American election.

Vinnick was arrested in a resort area of Greece in the summer of 2017 while vacationing with his family, and has been held in various Greek detention facilities ever since, as the US, France and Russia all vie for his extradition.

Vasiliev’s tenure at WEX was far from quiet, and numerous investors have reportedly alleged they lost money on the platform.

One group even reportedly published an open letter to Russian President Vladimir Putin asking him to intervene in the case.

The Russian embassy in Italy has declined to comment on Vasiliev’s arrest, as did the Guardia di Finanza.

Disgraced Mt Gox Bitcoin Exchange CEO Reasserts Innocence at Tokyo Embezlement Trial

Mark Carpeles, the disgraced former CEO of the now-defunct early Bitcoin exchange Mt Gox, has told a Japanese court that he did not embezzle 340 million yen (~$3 million USD) from the exchange in 2013, NHK reports.

Mt Gox fell apart in the early months of 2014 after $423 million in bitcoins and $247 million in cash disappeared from exchange coffers.

The exchange became insolvent, and for several months, would not allow customers to withdraw cash or bitcoins before it folded altogether.

Mt Gox investors in the US are now suing Carpeles and the bank servicing Mt Gox because they continued to accept deposits to the exchange while freezing withdrawals.

Investors who lost funds at Mt Gox used digital forensics to trace some of the bitcoins stolen from Mt Gox to a bitcoin account held by Alexander Vinnick, a Russian citizen accused of laundering money while he allegedly ran the London-based bitcoin exchange BTC-e, which is also now defunct.

Vinnick is currently at the centre of a tug of war between the US, France and Russia, all of which are seeking Vinnick’s extradition from Greece to face charges of fraud and money laundering relating to his time at BTC-e.

Vinnick was arrested by Greek police at the behest of the US Secret Service in June of 2017 while he vacationing there with his wife and two young children.

Vinnick and/or BTC-e may also have processed some of the Bitcoin used by Russian hackers to conceal the funding behind their comprehensive hacks on the 2016 US presidential election.

Carpeles has claimed that all the funds missing from Mt Gox were stolen in hacks, but many suspect an inside job.

In the very least, Carpeles has been plausibly accused by former employees of acute incompetence, and Japan prosecutors claim he took the $3 million out of the exchange to fund his personal projects without properly documenting the transfers, a fact prosecutors claim indicates that Carpeles had no intention of returning the funds.

Prosecutors are seeking 10 years imprisonment for Carpeles, who said in a final statement on the 27th day of the trial:

“We were sorry we did not prevent (the) hacking. We insist (we are) not guilty (of) every sin.”

 

More Details Surface on the Extradition of Romanian Crypto Exchange Operator to US

A Romanian citizen arrested last week by local cyber police and American Secret Service agents has been released on bail in the city of Cluj where he runs one of the region’s largest crypto exchanges.

The agents flew to Romania to seek the arrest and extradition of to Vlad Nistor, 30, CEO of the Coinflux exchange.

He is reportedly wanted in the US to face charges relating to his running of Coinflux, including charges of fraud, computer fraud, leading an organized crime group and money laundering.

Bail conditions stipulate that Nistor must remain in the region of Cluj for a period of “judicial control” totalling 30 days.

Nistor, who reportedly has 7-years of experience in the financial sector, including time spent managing a large retirement savings fund, must refrain from doing any financial transactions while in Cluj.

Coinflux, meanwhile, is shut down following the freezing of its bank accounts.

The exchange communicated the following about the closure in a blog post:

“Due to a recently started, unexpected investigation, we are in the unpleasant situation of temporarily stopping any digital currency exchanges … We are doing all possible efforts, along with our legal advisers, to make sure everyone who had money deposited in Coinflux wallets gets it back.”

The post also states that the exchange has lost administrative control of its website and email list but hopes to restore its access to these, “within the next days.”

Nistor’s arrest has been protested by writers in local media and, reportedly, by lawyers, who have argued the facts presented to them regarding Nistor’s supposed crimes are thin.

At least one outlet has described the arrest of Nistor as illegal and an instance of the overreaching use of Romania’s extradition treaty with the US.

A Russian national called Alexander Vinnick has been being held for over a year in prison in Greece as several countries vie to have him extradited for alleged financial crimes.

Vinnick was the alleged administrator of the now-defunct BTC-e, which was based in London.

Vinnick was arrested suddenly in July of last year while vacationing with his wife and two children in Thessaloniki. American Secret Service agents were also present at the Vinnick arrest.

Vinnick has denied he was a key player at BTC-e and has characterized his endeavours there as a simple matter of processing crypto trades.

At the same time, however, he has reportedly confessed responsibility for financial crimes related to BTC-e brought against him in Russia.

In three separate trials, Greek courts have agreed to extradite Vinnick to France, the US, and Russia. Greece, too, is now reportedly considering pursuing its own case against Vinnick for alleged financial crimes that may have affected Greeks.

Victims of the Notorious Mt Gox hack claim to have traced bitcoins stolen from there to digital wallets registered in Vinnick’s name.

Unlike in France, the case against Vinnick in the US may have a political dimension as it is believed Vinnick could have processed Bitcoins on behalf of “Fancy Bear”: a team of Russian hackers indicted by Mueller for executing an elaborate cyber-based program to swing the US election in favour of Donald Trump.

In September, Greek officials said they found poison in Vinnick’s food, an incident was careful to attribute to criminal and not government elements in Russia.

Vinnick meanwhile has protested his treatment in custody and says he has been forced to sleep on concrete floors, on bare metal bedsteads, and has been transported long distances while cuffed.

Vinnick also recently passed a note to the Russian consul during one of his court appearance stating that he plans to go on hunger strike to protest his treatment and protracted detention.

Japan Prosecutors Seeking 10 Years Imprisonment for Disgraced Mt Gox Bitcoin Exchange CEO, Mark Karpeles

Prosecutors in Japan today asked the courts to levy ten years imprisonment against Mark Karpeles, former CEO of Mt Gox, the largest early bitcoin exchange, Nikkei Asian Review reports.

Mt Gox folded in 2014 after $423 million in bitcoins and $247 million in cash went missing from exchange coffers in the final months of 2013.

Civil remediation proceedings began earlier this year as a trustee tried to return stolen bitcoins to harmed investors.

Karpeles has maintained his innocence, claiming the sums were lost in a hack or hacks.

But prosecutors claim he took almost $3 million dollars off the exchange for personal use and made no indication that he planned to return the money:

“There was no documentation of loans and there was no intention of paying back…His responsibility is severe.”

Japan prosecutors also accuse Karpeles of unlawfully manipulating accounts and doctoring exchange data. An additional charge of violating various Japanese corporate laws are also in place.

Writer Brian Patrick Eha wrote about Mt Gox in his 2017 book about Bitcoin, How Money Got Free.

According to Eha, prior to the Mt Gox failure:

“The code underlying the exchange platform was ‘a spaghetti mess,’ according to an company insider. And management practices were worse -when they existed at all…’The environment was completely dysfunctional,’ the insider said…there were no (code-testing) safeguards in place…’Mark loved to circumvent…He had direct access to all the servers, so whenever he wanted to change something, he would just change it on the live side, and that was that’…On a financial exchange that had one million users…such a devil-may-care attitude was potentially disastrous.”

While the courts have yet to determine criminality on Karpeles part,  the general consensus in early Bitcoin communities is that, in the very least, Karpeles was incompetent:

“There had long been questions about Mark Karpeles leadership. In June 2011, when Roger Ver rushed to aid Mt Gox in its recovery from the hack, he was astonished to learn that the CEO would be taking the weekend off rather than working around the clock to get the exchange back online.”

Karpeles was also reportedly distracted by side ventures including the creation of a bitcoin-friendly French restaurant in Tokyo.

Following the disaster at Mt Gox, tech savvy customers that lost bitcoins used cyber forensics to track 600 000 bitcoins removed from the exchange, and claim digital traces led directly to the personal bitcoin accounts of Alexander Vinnick, a Russian accused of laundering bitcoins at the also now defunct BTC-e exchange.

Vinnick is currently in prison in Greece, and has been ordered extradited to the US, France and Russia, where he is sought to account for various alleged crimes relating to his time at BTC-e.

Vinnick may also have helped process bitcoins used by the Russian hackers indicted this spring by Robert Mueller for allegedly interfering in the 2016 US election.

Greek officials say someone tried to poison Vinnick’s prison food in September, and Greek authorities may now also be investigating Vinnick in order to pursue their own criminal case against him.

Russian media has also reported that Vinnick recently passed a note in a Greek courtroom to the Russian consul stating that he intends to go on hunger strike to protest his alleged mistreatment in prison.

Vinnick reportedly says he been forced to sleep on concrete floors and on metal bedsteads, has been transported long distances while cuffed and is being fed substandard food.