On July 26, 2017, the U.S. Department of Justice announced that a grand jury in the Northern District of California had indicted Alexander Vinnik, a Russian national, and BTC-e, the bitcoin exchange that Vinnik allegedly operated, and one of the world’s largest and most widely used digital currency exchanges.
The 21-count indictment alleges that Vinnik, who had been arrested in Greece a day earlier on July 25, owned and operated several BTC-e accounts, including administrator accounts. According to the indictment, numerous withdrawals from BTC-e administrator accounts were deposited directly into Vinnik’s personal bank accounts, and certain well-known hacks and thefts from bitcoin exchanges were funded through one of Vinnik’s BTC-e administrator accounts. The indictment also alleges that Vinnik received funds from the infamous hack of another bitcoin exchange, Mt. Gox, and that Vinnik funneled those funds through BTC-e accounts.
With respect to the bitcoin exchange itself, the indictment alleges that BTC-e was operated to facilitate transactions for cybercriminals around the globe, and that BTC-e received proceeds from various criminal schemes, including identify theft, corruption, and narcotics distribution schemes. The indictment further alleges that BTC-e has received more than $4 billion worth of bitcoin. According to the indictment, BTC-e did substantial business in the U.S., but had not registered as a money service business with the U.S. Department of Treasury, and lacked anti-money laundering and customer identify verification processes.
BTC-e and Vinnik are each charged with one count of operation of an unlicensed money service business in violation of 8 U.S.C. § 1960, and one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h). The indictment also charges Vinnik with seventeen counts of money laundering, in violation of 18 U.S.C. § 1956(a)(1), and two counts of engaging in unlawful monetary transactions, in violation of 18 U.S.C. § 1957.
In addition, on July 26, 2017, FinCEN assessed a $110 million civil monetary penalty against BTC-e, and a $12 million civil monetary penalty against Vinnik, for violations of anti-money laundering laws.