On July 25, a civil lawsuit was filed in the Northern District of California, indicting defunct cryptocurrency exchange BTC-e and its supposed executive Alexander Vinnik for alleged violations of the Bank Secrecy Act.
The Financial Crimes Enforcement Network (FinCEN) is seeking to recover civil money penalties of $88.6 million and $12 million from BTC-e and Alexander Vinnik, respectively, plus interest and the plaintiff’s costs.
BTC-E Described as Prefered Crypto Exchange Among Cybercriminals
Vinnik was indicted for 17 counts of money laundering and two counts of engaging in unlawful monetary transactions, while both he and BTC-e have been charged with one count of conspiracy to commit money laundering and one count of operating an unlawful money services business.
The filing states that BTC-e served approximately 700,000 users worldwide, “including numerous customers in the United States and the Northern District of California.”
Despite more than 21,000 BTC transactions valued at least $296 million being conducted by United States-based users, the exchange “made no effort to register with FinCEN” nor “maintain any elements of an AML program.”
The document asserts that “BTC-e was used by cybercriminals worldwide and was one of the principal entities used to launder and liquidate criminal proceeds, converting them from digital currencies, including bitcoin, to fiat currencies, including U.S. Dollars, Euros, and Rubles.”
The filing also emphasizes that BTC-e users “did not need to provide even the most basic identifying information,” requiring that customers only provide “a self-created username, password, and an email address.”
BTC-e “Obscured and Anonymized Transactions and Sources of Funds”
When accepting funds via bank wire, the exchange would reportedly instruct customers to transfer funds to one of its ‘front’ companies that “although nominally separate from BTC-e were, in fact, controlled by and operated for the benefit of BTC-e.”
Similarly, withdrawals were conducted through “third-party ‘exchangers’ or other processors,” allowing the exchange to “avoid collecting any information about its users that would leave a centralized financial paper trail.”
The filing asserts that BTC-e wallets often received the criminal proceeds from cybercrimes directly, including “numerous hacking incidents, ransomware payments, identity theft schemes, embezzlement by corrupt public officials, and narcotics distribution,” concluding that a substantial portion of the exchange’s business was directly derived from suspected criminal activity.
On July 19, Dmitri Vasilyev, the former chief executive officer of the now-defunct WEX exchange – a BTC-e spin-off that emerged following the exchange’s collapse, was arrested in Italy.
