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Cryptocurrency exchange operator indicted over massive bitcoin laundering scam

27 July 2017  |  8325 views  |  0 Bitcoin

A US jury has indicted a Russian man arrested earlier this week in Greece accused of helping to launder more than $4 billion in bitcoin, including some obtained from the infamous Mt. Gox hack. In a coordinated move, the bitcoin exchange he operated has been slapped with a $110 million fine by American authorities for AML law violations.

Alexander Vinnik was picked up by Greek police in a small village on Tuesday following an investigation led by the US Justice Department. Yesterday, a grand jury indicted him and BtC-e, the exchange he allegedly ran, for operating an unlicensed money service business, money laundering, and related crimes.

One of the world's largest digital currency exchanges, authorities claim BTC-e was "heavily reliant" on criminals as customers, with Vinnik enticing them by not requiring users to validate their identity, obscuring and anonymizing transactions and source of funds, and by lacking any AML processes.

Since launching in 2011, BTC-e received more than $4 billion worth of bitcoin, much of it the proceeds of crimes such as hacks, ransomware scams and drug rings, says the DoJ.

Vinnik himself received money from the Mt. Gox hack, alleges the indictment, laundering it through BTC-e and another, now defunct, exchange called Tradehill.

“BTC-e was noted for its role in numerous ransomware and other cyber-criminal activity; its take-down is a significant accomplishment, and should serve as a reminder of our global reach in combating transnational cyber crime," says Special Agent in Charge of the USSS Criminal Investigative Division Michael D’Ambrosio.

In addition to the criminal charges, Vinnik faces an $11 million penalty from the Financial Crimes Enforcement Network (FinCEN), which has also slapped BTC-e with a $£110 million fine.

In a first action against a foreign-based money service, FinCEN levied the fines for wilful violation of AML laws, accusing the exchange of facilitating transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.

Jamal El-Hindi, acting director, FinCEN, says: "We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they wilfully violate U.S. anti-money laundering laws."

The move is part of a wider crackdown on the cryptocurrency wild west. This week, the SEC moved to take on the rise of Initial Coin Offerings, warning that issuers of "distributed ledger or blockchain technology-based securities" must register offers and sales.

Meanwhile, the state of Washington has decided that its money transmitter laws now apply to cryptocurrency exchanges.

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