US prosecutors recently filed a civil lawsuit against the now-defunct cryptocurrency trading platform BTC-e and alleged Bitcoin launderer Alexander Vinnik, according to the court papers filed on Friday last week in California.
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The exchange was also utilized by cybercriminals and hackers to perform money laundering and liquidation by clandestinely converting their proceeds from digital currency including Bitcoin to fiat money like dollars, pounds, and euros.
Alexander Vinnik has been incarcerated in Greece since July 2017 where he was taken into custody in Thessaloniki by Greek law enforcement officers with support from American police.
Penalties against Vinnik and BTC-e were evaluated in California at roughly the same time as his detention 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.”
Since Vinnik’s arrest, his extradition has been sought by the authorities of the United States, Russia, and France for presumably perpetrating or facilitating cybercrimes and/or fraud against individuals in those nations.
Initially, federal prosecutors in San Francisco charged Vinnik with the theft of Bitcoin from other exchanges in 2017. Vinnik is accused of operating BTC-e, the now-defunct Cyprus and Seychelles-based Bitcoin cryptocurrency exchange that, among other things, purportedly processed Bitcoins used by Russian cyber espionage group and intelligence service Fancy Bear to fund their cyberattacks on the 2016 US presidential elections.
Vinnik also allegedly held accounts connected with other significant illicit activities, including the security breach of another now-defunct Bitcoin exchange Mt. Gox. Victims of the infamous Mt. Gox exchange hack also tracked some of the $500 million USD worth of Bitcoins stolen from Mt. Gox users to accounts directly under the control of Vinnik.
According to accounting/consulting firm PricewaterhouseCoopers (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…”
From the official criminal complaint, it is noted that BTC-e and Vinnik never even made an attempt to register their business with FinCEN (Financial Crimes Enforcement Network) or even try to implement the existing Anti-Money Laundering (AML) practices.
According to the complaint, BTC-e never required an identity-check by means of any procedures to sign up and begin deploying the service, though, it sometimes required ID proof for specific wire transfers.
This latest legal battle against Vinnik should grant pause to any exchange or wallet service that merely recently started to carefully inspect customers and flag questionable transactions.