Russian National Charged by U.S. DoJ for Multi-billion Bitcoin Fraud

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Multi-billion Bitcoin Fraud
Alexander Vinnik | en.crimerussia.com

On Wednesday, a U.S. grand jury charged a Russian national for his alleged involvement with a multi-billion dollar Bitcoin laundering scheme.

Alexander Vinnik, 38, was arrested on Tuesday in a small village near a beach in Northern Greece, following an investigation led by the U.S. Department of Justice together with several other federal agencies and task forces involved.

Following his arrest, Vinnik was charged with 21 counts that include laundering over $4 billion USD worth of Bitcoin from the hacked funds of Mt. Gox Bitcoin Exchange.

In a statement released by the Department of Justice, Vinnik was tagged as the operator of BTC-e, an exchange platform for trading the cryptocurrency Bitcoin.

Russian suspected of money laundering billions of #bitcoin already charged.Click To Tweet

According to BBC, the U.S. Attorney’s Office in California’s northern district said that the Russian national’s indictment covered “operating an unlicensed money service business, money laundering, and related crimes.”

“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 Brian Stretch, U.S. Attorney for the Northern District of California.

Further reports claimed that apart from receiving billion dollar worth of Bitcoin, Vinnik and his firm also conducted business in the United States without following appropriate protection protocols against money laundering and other crimes.

Multi-billion Bitcoin Fraud: The Hacking of Mt. Gox

in 2014, the Japan-based Bitcoin exchange Mt. Gox was forced to declare bankruptcy after it was hacked and over 850,000 Bitcoin worth millions of dollars that time was stolen from it.

Vinnik through his companies, BTC-e Exchange and San Francisco-based Tradehill, allegedly received funds from the said hacking incident according to the reports of U.S. authorities who investigated the case.

Alexander Vinnik
Alexander Vinnik | AFP/Getty Images

Bitcoin is deemed to be one of the first digital currencies to use cryptography to secure its transactions and keep them pseudonymous. Apparently, this financial structure is the primary reason why it is difficult for authorities to regulate its transactions.

However, law enforcement agencies around the world are still able to track users behind pseudonymous wallets engaged in illegal activities by enlisting the help of many cryptocurrency experts.

Right now, Mt. Gox is considered a proof of how investors could easily lose millions of investment in a snap. When the said trading platform collapsed, an estimated $450 million USD worth of Bitcoin and $27 million USD in hard cash was reported to disappear with it.

Aside from money laundering, authorities also suspect Vinnik of being involved with other crimes such as tax refund fraud, hacking, fraud, identity theft, drug trafficking, and public corruption.

A day after Vinnik’s arrest, a tweet from the BTC-e Exchange said that they were having unplanned maintenance and they will be back in operation in the next 5 to 10 days.

BTC-e is one of the oldest virtual currency platforms. It allows users to make transactions pseudonymously and is widely known for its relaxed standards for checking users’ identity and collaborating with law enforcement. Nothing is known about its operators until the arrest of the Russian citizen.

Vinnik has still not given any statement and authorities in Greece are already preparing his extradition to the U.S.

Is it about time for governments to take the necessary measures and order cryptocurrency platforms to abolish pseudonymous user wallets?

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