Founders of BTC-e Bitcoin Exchange allegedly linked with ‘Russian hacker’ Vinnik will return money to users
The announcement of the arrest of Russian citizen Alexander Vinnik was like a thunderbolt from a clear sky. The Greek police calls him the “brain” of the group involved into the laundering of $4 billion through BTC-e Bitcoin Exchange. The interest to Vinnik is huge – both in Russia and the U.S.
Vinnik has been detained on July 26 in the Greek city of Thessaloniki; the arrest was a complete surprise for the ‘hacker’ vacationing with his family. The capture of the Russian citizen was a result of a special operation carried out by the FBI that has charged Vinnik with laundering $4 billion through BTC-e Bitcoin Exchange and theft of 850 thousand BTC (some $500 million at the then exchange rate) from Mt.Gox Japanese exchange.
Theft of funds from Mt.Gox, a major cryptocurrency exchange, had sparked mass protests
The FBI believes that Vinnik had created at the exchange operational conditions for cashing out revenues from the global drug trafficking and other shadow spheres of economy.
After the arrest of Vinnik, analysts from Wiz Security (WizSec) investigation group announced that they had earlier determined the complicity of the Russian native in the theft of Mt.Gox funds.
WizSec is a Japan-based independent investigation group consisting of blockchain analysts and former Mt.Gox clients that has been investigating the shutdown of the exchange for several years. WizSec had already provided information to law enforcement authorities in the past.
The American special services require to extradite the alleged hacker to the U.S. where he faces a minimal prison term of 20 years and fine of $12 million. The BTC-e Bitcoin Exchange has been fined $110 million. In addition, its employees have been accused of breaching the anti-money laundering legislation – KYC/AML (Know Your Customer/Anti-Money Laundering).
Currently Vinnik remains in custody in the pretrial detention facility of Thessaloniki waiting for a decision of the Greek Judicial Council. A CrimeRussia source told that he is to be extradited to the U.S. – either quickly or through a lengthy painstaking procedure. According to the source, Vinnik remains silent and refuses to collaborate with the law enforcement authorities. Earlier he has completely denied all the allegations.
United States’ Motion to Seal Superseding Indictment, Arrest Warrants and Order
FBI and BTC-e
A day before the announcement of the Vinnik’s arrest, the BTC-e web site became inaccessible. Information about “technical works” at the resource was posted in the official Twitter of the exchange. Three days later, on July 28, the BTC-e domain has been seized by six U.S. law enforcement services, including the Secret Service of the Department of the Treasury.
Announcement of the domain seizure on btc-e.com
On July 31, a BTC-e representative posted an announcement on Bitcoin Forum that the servers of the exchange storing the databases and electronic wallets have been seized by FBI operatives. A portion of the BTC-e funds was also seized by the U.S. special service. In addition, the BTC-e representative has announced an upcoming update with “options to restore the service” and the “money retrieval procedure should the service be not resumed”. The exchange representative has outlined the refund period: should the service be not restored by the end of August, the exchange is to start refunding monies to its clients since September 1. The post concludes laconically: “Everybody gets the money back!”
Announcement posted by BTC-e representatives: More detailed information on what has happened with BTC-e service
On July 25, at 11:00, FBI operatives have come to the data center hosing our servers and seized all the equipment; the databases and wallets of our service were located on these servers.
For almost 6 days, we could not get any meaningful information on what has happened with our servers from our hosting provider; this is why we publish this information only now.
The domain has been seized on July 28.
Currently, some of the service funds are seized by the FBI.
In the next update, we will provide information on possible options to restore the service and money retrieval procedure should the service be not resumed. Within the given situation, should the service be not restored by the end of August, we are to start the money refund process since September 1.
In the coming 1–2 weeks, we are going to assess and publish information on the amount of money fallen into the FBI hands and the amount available for refund.
For those who has already buried us, I would like to remind: the service has always been working based on the trust, and we are ready to reply for this.
Arrest of Russian citizen Alexander Vinnik:
We hereby officially state: Alexander never was the head or an employee of our service.
P.S. Please post your questions in the topic, we will respond to the best of our ability.
The representative has specifically noted that Alexander Vinnik never had any relation to BTC-e. Cofounder of ZRCoin Andrei Nikonorov in his interview to Kommersant has also refuted the version of the American special services claiming that Vinnik was the creator of the exchange. He believes that the case against the Russian-language exchange is political: the FBI wants to shut down all financial flows that are beyond its control.
Sergei Dobryshkin, Editor-in-Chief of Blockchain and Bitcoin in Russia information portal (cryptorussia.ru), has shared his opinion with the CrimeRussia journalist. The expert said that BTC-e is one of the oldest exchanges established at the dawn of the bitcoin. Two natives of Skolkovo – Aleksander and Aleksei (their last names are unknown) – are believed to be its founders. BTC-e is the largest Russian-language cryptocurrency exchange. According to Bitcoinity.org, 3.73% of the global transaction volume went through BTC-e in the last month; this equals to 177 thousand BTC (some $444 million).
Bitcoin is the first decentralized digital currency in the world and also an international payment service allowing to make bitcoin transactions. Its main distinction from the traditional payment services is that the bitcoin system has no management or processing center – all transactions are made within the network of equal users.
Sergei Dobryshkin expressed strong doubts with regards to one of the charges laid against Vinnik – theft of Mt.Gox funds. The expert has reminded that at that time, the volume of bitcoins at the cryptocurrency market was small – therefore, the funds could be transferred to another exchange absolutely legally and without any involvement of Vinnik. Dobryshkin also believes that the suspect might be not the founder of BTC-e, but just its ordinary administrator. It can’t be ruled out though that at his low-level position he could pull off global financial operations.
The authors of DeCenter community have performed their own inquest and concluded that Vinnik is either completely unrelated to BTC-e or related to it indirectly. According to the journalists, London-based Always Efficient LLP is the BTC-e management company. Its current head is some Aleksander Buyanov and domain btc-e.org is also registered in his name. Therefore, the authors of DeCenter suppose that Buyanov might be a cofounder of BTC-e.
However, millions of ordinary users do not care of these nuances – what they need is to get their money back. The CrimeRussia has researched the situation with BTC-e and found out that this may be possible. One of the players told us on condition of anonymity how he managed to get back his money from the shut down exchange.
On May 31, BTC-e technical support service has introduced the verification option allowing to invest funds with a lower commission – but the verification had to be performed via xBTCe. Not only do BTC-e and xBTCe exchanges have similar names, but also same exchange rates for all the cryptocurrencies. Any experienced player can confirm: this means that the two portals are linked – different exchanges can’t have identical rates. The distinction between the two exchanges was in the compliance with above mentioned KYC/AML regulations: xBTCe required a mandatory registration and disclosure of information, while in order to trade at BTC-e, an e-mail address was sufficient.
Apprehensions could be the reason behind the creation of the second trading resource: BTC-e founders might be aware of the upcoming attack of the American special services and decided to create a ‘reserve airfield’.
So, after the full-scale registration at xBTCe, the player got access to his wallet on BTC-e.
After the closure of BTC-e on July 25, xBTCe has stopped its operations as well. On July 26, Vinnik has been arrested in Greece, and the clients became concerned about their money. On July 27, the CrimeRussia source paid the standard 3.5% commission to the exchange and managed to transfer the funds to his electronic account.
It is necessary to note that the CrimeRussia is aware only of this single example of a successful retrieval of money from xBTCe.
An invoice provided by the source indicates that the funds have been transferred from BTC-e by some XP Solutions Limited incorporated in New Zealand. According to several databases, this company belongs to David Raymond Grant Campbell and Denis Peganov. Apparently, the first co-owner is a dummy figure (a number of different companies are registered in his name), while the second one is a public personality and General Director of FXOpen, a retail and institutional Forex broker.
It is necessary to note that FXOpen also specializes in cryptocurrency deposits and withdrawals. Another interesting detail: a sample invoice shown in the deposits section of the FXOpen web site is identical to the document provided by the source. In both cases, XP Solutions Limited is the recipient of funds. In addition to the common director, both companies have the same legal address: Level 3, 187 Queen Street, Auckland Central, Auckland, 1010, New Zealand.
Elena Isaeva is in charge of the FXOpen Representation Office in Russia. She is also a Deputy Chairperson of the Expert and Advisory Council of the Budget and Financial Markets Committee of the Russian Council of the Federation.
We have called FXOpen to get a comment with regards to the possible links between FXOpen and BTC-e. A specialist on the line said that XP Solutions Limited is a partner of the brokerage but could not explain why the two companies have an identical legal address and the same director.
Regardless of the alleged ties that Alexander Vinnik could (or could not) have with BTC-e, the largest Russian-language cryptocurrency exchange has suffered a severe blow; it is unlikely that it restores the previous trading volumes any time soon. We can only hope that all the service users ultimately get their money back.