The Justice Department has dropped charges related to the hack of cryptocurrency exchange Mt. Gox in 2011 and exposed the operation of the illicit cryptocurrency exchange BTC-e.
According to court documents, Alexey Bilyuchenko, 43, and Aleksandr Verner, 29, both Russian citizens, are charged with conspiracy to launder approximately 647,000 bitcoins from their hack of Mt. Gox. Bilyuchenko is also accused of conspiring with Alexander Vinnik to exploit BTC-e from 2011 to 2017.
“This announcement marks an important milestone in two major cryptocurrency studies. As alleged in the indictments, from 2011 Bilyuchenko and Verner stole a huge amount of cryptocurrency from Mt. Gox, contributing to the exchange’s eventual insolvency. Armed with the ill-gotten gains of Mt. Gox, Bilyuchenko allegedly helped set up the infamous BTC-e virtual currency exchange, which laundered money for cybercriminals around the world,” said Assistant Attorney General Kenneth A. Polite, Jr. the Justice Department.”These indictments highlight the department’s unwavering commitment to bringing bad actors in the cryptocurrency ecosystem to justice and preventing abuse of the financial system.”
“As cybercriminals have become more sophisticated in their theft methods, so too have our prosecutors and law enforcement partners become experts in the latest technologies being misused for malicious purposes,” said US Attorney Damian Williams of the Southern District of New York. . “As claimed, Alexey Bilyuchenko and Aleksandr Verner thought they could outsmart the law by using sophisticated hacks to steal and launder massive amounts of cryptocurrency, a new technology at the time, but the unsealed indictments show that we able to doggedly prosecute these alleged criminals. no matter how complicated their plans are, until they are brought to justice.”
“For years, Bilyuchenko and his co-conspirators allegedly ran a digital currency exchange that enabled criminals around the world — including computer hackers, ransomware actors, narcotics gangs and corrupt government officials — to launder billions of dollars,” the US said. attorney Ismail J. Ramsey for the Northern District of California. “The Department of Justice will work tirelessly to identify cybercriminals wherever they are. And Bilyuchenko and his co-conspirators will find that the Justice Department has long arms and an even longer memory for crimes that harm our communities.”
Indictment against the Southern District of New York
According to court documents unsealed in the Southern District of New York (SDNY) in or about September 2011, Bilyuchenko, Verner, and their co-conspirators allegedly gained unauthorized access to the server containing the cryptocurrency wallets for Mt. Gox. At that time Mt. Gox the largest Bitcoin exchange in existence, with thousands of users around the world. Mt. Gox kept the cryptocurrency wallets containing its customers’ bitcoin and the corresponding private keys used to authorize bitcoin transfers from those wallets on a computer server in Japan.
“The FBI will continue to work with our U.S. government and international partners to relentlessly pursue and disrupt malicious cyber actors wherever they are,” said Bryan Vorndran, Deputy Director of the FBI’s Cyber Division. “When cybercriminals engage in fraudulent activities such as hacking and illegally operating cryptocurrency exchanges, it is critical that we charge the bad actors and ensure they are brought to justice.”
Bilyuchenko, Verner and their co-conspirators allegedly denied their unauthorized access to Mt. Gox to fraudulently arrange for bitcoin to be transferred from Mt. Gox to bitcoin addresses controlled by Bilyuchenko, Verner and their co-conspirators. From September 2011 to at least May 2014, Bilyuchenko, Verner and their co-conspirators allegedly caused the theft of at least approximately 647,000 bitcoins from Mt. Gox, which holds the vast majority of Mt. Gox represents. Bilyuchenko, Verner and their co-conspirators reportedly laundered most of the bitcoins sent through Mt. Gox have been stolen, primarily through bitcoin addresses linked to accounts Bilyuchenko, Verner and their co-conspirators monitored on two other online bitcoin exchanges.
“Cryptocurrency offers criminals a new way to steal and launder money, but greed and deceit are nothing new,” said Chief Jim Lee of IRS Criminal Investigation (IRS-CI). “IRS-CI is specially equipped to track the complex financial trail criminals leave behind, and we are committed to holding them accountable for crimes committed. IRS-CI is proud to announce this indictment along with our law enforcement partners.”
In furtherance of the money laundering program, Bilyuchenko, Verner and their co-conspirators allegedly negotiated and entered into a fraudulent contract (the “Advertisement Contract”) in or about April 2012 to provide alleged advertising services to a Bitcoin brokerage service based in the Southern District of New York (the “New York Bitcoin Broker”). Under the guise of the advertising contract, Bilyuchenko and Verner, in order to get the Mt. Gox to conceal and liquidate stolen bitcoins, reportedly making regular requests to the owner and operator of the New York Bitcoin Broker to make large transfers to various offshore bank accounts, including in the name of shell companies controlled by Bilyuchenko, Verner and their co-conspirators. In accordance with these requests, the New York Bitcoin Broker allegedly transferred more than approximately $6.6 million to foreign bank accounts controlled by Bilyuchenko, Verner, and their co-conspirators between approximately March 2012 and approximately April 2013. In exchange for the wire transfers, New York’s Bitcoin Broker allegedly received “credit” on Exchange-1, allegedly allowing Bilyuchenko, Verner and their co-conspirators to recover more than 300,000 of Mt. Gox laundered. The fraudulent advertising contract with New York Bitcoin Broker allegedly enabled Bilyuchenko, Verner and their co-conspirators to sell bitcoins traded through the Mt. Gox hack were stolen, conceal and liquidate.
Mt. Gox ceased operations in 2014 after the theft was revealed.
Northern District of California indictment
According to court documents unsealed in the Northern District of California (NDCA), Bilyuchenko allegedly collaborated with Vinnik and others to operate the BTC-e exchange from 2011 until it was shut down by law enforcement in July 2017. During that period BTC-e was one of the world’s largest cryptocurrency exchanges and was one of the main ways cybercriminals around the world transferred, laundered and stored the criminal proceeds of their illegal activities.
BTC-e served more than one million users worldwide, moved millions of bitcoins in deposits and withdrawals, and processed billions of dollars in transactions. BTC-e received criminal proceeds from numerous computer break-ins and hacking incidents, ransomware events, identity theft programs, corrupt government officials, and narcotics distribution rings.
“The Secret Service has a long tradition of pursuing and bringing to justice those who seek to exploit our financial systems and attack innocent victims,” said Special Agent William Mancino of the US Secret Service’s Criminal Investigative Division. “Working with our local, state and federal law enforcement partners, we will continue to investigate criminal organizations operating in the ever-evolving cyber realm.”
“Homeland Security Investigations (HSI) continues to investigate cybercriminals who operate illegally in virtual spaces, and we are proud to have worked with our law enforcement partners to bring these two individuals to justice,” said Acting Executive Assistant Director Katrina W. Berger of HSI. “Our special agents continue to investigate transnational criminal organizations operating in emerging technologies, leveraging our broad authority to identify and dismantle those behind sophisticated crypto scams.”
The SDNY indictment charges Bilyuchenko and Verner with conspiracy to commit money laundering. The NDCA indictment charges Bilyuchenko with money laundering conspiracy and running an unlicensed money services company.
The US Attorney’s Office for the Southern District of New York’s Complex Frauds and Cybercrime Unit is handling the SDNY case. The FBI and IRS-CI are investigating the case and SDNY Assistant US Attorney Olga I. Zverovich is prosecuting the case.
The Corporate and Securities Fraud Section of the US Attorney’s Office for the Northern District of California and the Computer Crime and Intellectual Property Section (CCIPS) of the Criminal Division are handling the NDCA case. the feds; IRS-CI Oakland Field Office and Cyber Crime Unit in Washington, DC; United States Secret Service Criminal Investigation Department; and HSI are investigating the matter. CCIPS Trial Attorney C. Alden Pelker and NDCA Assistant US Attorney Claudia Quiroz, both members of the National Cryptocurrency Enforcement Team, and NDCA Assistant US Attorney Katherine Lloyd-Lovett are prosecuting the case. The Justice Department’s Office of International Affairs provided invaluable assistance.
A criminal charge is just an accusation. All defendants are presumed innocent until proven guilty in a court of law beyond reasonable doubt.