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OCCRP Report On BTC-e Operator Alexander Vinnik And The Cold Cyber War Between U.S. And Russia

The Russian Alexander VINNIK was indicted by U.S. authorities in July 2017 charging with money laundering, computer hacking, and drug trafficking. VINNIK was the operator of the crypto exchange BTC-e and allegedly laundered between USD 4 billion and USD 9 billion in bitcoin connected o cybercrime, drug trafficking, public corruption, and tax refund fraud schemes. He was arrested in a small beachside village in Greece. The U.S. is still waiting for his extradition. The Russian government, however, also seeks VINNIK’s extradition.

In December 2017, Greece’s Supreme Court ruled that Alexander VINNIK should be extradited to the U.S. He initially applied for political asylum in Greece in January 2018. The Russian Prosecutor General’s Office also sent a request for his extradition but got a refusal. VINNIK was now caught between the US and Russia in a legal battle over who should prosecute him. The investigative platform OCCRP published an interesting report on this case a few days ago.

In May 2018, VINNIK submitted a written confession to Russian authorities admitting to cyberfraud and money laundering on a large scale through his BTC-e exchange. Consequently, in June 2018, Russia filed new charges based on that confession, accusing him of computer fraud In Russia causing $12.4 million damage to Russian citizens. The charges carry a sentence of up to 10 years and enabled Moscow to file a second extradition request.

Later in 2018, France filed an extradition request for VINNIK accusing Vinnik of defrauding French citizens. Because France and Greece are EU member states, extraditing Vinnik there doesn’t require approval by the Greek justice minister. In December 2018, the Greek Supreme Court decided VINNIK should be sent to France since Paris had submitted a European Arrest Warrant against him that offered a more direct procedure, one of the sources said. For the time being, however, VINNIK will remain in Greece until officials sort out the issue of the conflicting decisions.

On Jan. 15, the Russian state publication RT ran a photograph of him looking emaciated after what it described as 50 days on a hunger strike. The report quotes VINNIK theorizing that the Russian state is paying his legal bills and saying that he hopes ultimately to return home.

The Political Dimension Of Cybercrime

The Russian hacking team known as Fancy Bear was among BTC-e ’s clients, according to the blockchain forensics company Elliptic, and US prosecutors allege Fancy Bear, in turn, used Bitcoin (BTC) to fund hacking the Democratic National Committee (DMC). Fancy Bear’s methods are said to be consistent with the capabilities of state actors. The group targets government, military, and security organizations. Read more on Fancy Bear on Wikipedia.

No Russian official has publicly gone in the VINNIK case. However, Igor ASHMANOV, one of the country’s most powerful and politically connected tech tycoons, wrote an April op-ed for RIA Novosti in which he urged the Russian government to help VINNIK.

At the request of US officials, other Russian cybercriminals have been detained or extradited from Cyprus, the Netherlands, the Maldives, Canada, Latvia, the Czech Republic, Spain, Thailand, and Georgia. Among them was Andrei TYURIN who was arrested in Georgia and extradited to the U.S. in September 2018 in the case around Gery SHALON. But apart from VINNIK’s case, there have been only six instances over the past 10 years in which Russian officials have submitted competing extradition claims, according to OCCRP.


BTC-e In A Nutshell

Since its founding, BTC-e allegedly received criminal proceeds of numerous computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials, and drug distribution rings.

BTC-e was founded in or about 2011. In the years of its existence, BTC-e has served approximately 700,000 users worldwide. Between 2011 and 2016, bitcoin wallets associated with BTC-e had received over 9.4 million bitcoin (BTC). In 216 alone, BTC-e received over 1.8 million BTC valued at over USD 1.7 billion at the exchange rate in December 2016. Unlike legitimate payment processors or crypto exchanges, BTC-e did not require its users to validate their identity information. It hat no Anti-Money Laundering (AML) or Know-Your-Customer (KYC) processes and policies in place. According to U.S. authorities, BTC-e’s system was designed to support criminal organizations with their illegal transactions.

The U.S. prosecutors filed an indictment against the Russian Alexander VINNIK who is said to be the founder and operator of BTC-e in January 2017. VINNIK was arrested in Greece in July 2017.

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