Financial crimes investigative agency FinCEN has issued a $110 million USD “civil money penalty” against exchange BTC-e for money laundering. This comes after the company’s alleged operator Alexander Vinnik’s arrest in Greece. BTC-e’s site remains offline, leaving users anxious about when — or even if — they’ll be able to access their funds again.
Vinnik himself faces a $12 million FinCEN penalty, additional fines and up to 50 years or more in prison, if convicted.
California’s Northern District Court in San Francisco unsealed an indictment yesterday accusing Vinnik and BTC-e of money laundering and operating an unlicensed money services business.
Vinnik allegedly used multiple accounts on BTC-e to launder money for all manner of bitcoin-related crimes. These include proceeds from ransomware attacks, dark net marketplaces, drug trafficking, fraud and identity theft operations, and corruption by public officials.
Most notably, researcher WizSec announced earlier that Vinnik was its chief suspect in the theft of 630,000 BTC from Mt. Gox between 2011 and 2013. Many of these coins allegedly moved through wallets linked to Vinnik personally.
Michael D’Ambrosio, special agent in charge of the Secret Service’s Criminal Investigative Division, said:
“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.”
BTC-e and its shell parent company Canton Business Corporation were “heavily reliant on criminals” for their business, according to a statement on the U.S. Department of Justice website.
US Jurisdiction Over BTC-e Activities
The arrest is the culmination of an investigation by multiple U.S. law enforcement and regulatory authorities. As well as FinCEN, these include the FBI, IRS, Secret Service, Homeland Security, ICE, and even the FDIC.
The DOJ statement said BTC-e is located in Bulgaria, but is “organized or otherwise subject to the laws of Cyprus”. It also has a base of operations in the Seychelles.
More notably, and although that statement doesn’t mention it, the court indictment says BTC-e operated servers in the United States. The business also used third-party U.S. companies.
Acting assistant attorney General Blanco said:
“The (DOJ) Criminal Division will work tirelessly to identify those who use technology to conduct and obscure their criminal activity, as we ensure there are no safe havens from U.S. justice for those who seek to victimize Americans.”
Things Not Looking Good for BTC-e or Account Holders
Use of language like “take-down” and “illegal business” does not bode well for BTC-e or its account holders. Although the homepage says the site is down for “unscheduled maintenance” and displays a tweet saying it will be offline for five to ten days, it’s unclear who actually has control of the site and its exchange data.
BTC-e as a business appears to be finished. The authorities have not stated what they intend to do with the funds in its accounts — most of which likely belonged to non-criminal users.
Though policies vary, most cryptocurrency exchanges that handle fiat currencies (including Mt. Gox) have required users to complete some kind of identity verification for several years. However BTC-e appeared to allow unlimited account activity for nothing more than an email address.
Therefore, even if the exchange is permitted to open for withdrawals, there’s no way to tell which accounts belonged to criminals and which did not. The act of simply transacting on BTC-e could potentially be deemed criminal. Even in a best case scenario, account holders would be expected to provide identity documents to access funds.
This is yet another reminder that any cryptocurrency balances stored on centralized services like exchanges and “custodial” wallets are always vulnerable. As the community often likes to quote, “if you don’t have the private keys, you don’t own the coins”.
What do you think will happen to BTC-e account funds? Let’s hear your thoughts.
Images via BTC-e, Pixabay