Bitcoin Site Fined $110 Million for Money Laundering, Owner Arrested for Hacking

Jul 27, 2017

One of the oldest digital currency exchanges, known as BTC-e, remained off-line following a one-two punch by law enforcement over a series of allegedly criminal acts by the site and its owner.

On Wednesday, the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) announced a $110 million fine against BTC-e for facilitating crimes like drug sales and ransomware attacks along with a separate $12 million fine against its owner, Alexander Vinnik.

BTC-e is headquartered in Russia and has long served as a forum where users can exchange traditional currencies for bitcoin or other digital monies like Ethereum or Dash.

Meanwhile on Wednesday, the U.S. Justice Department also filed a series of criminal charges, including conspiracy and money laundering, against Vinnik after snatching him up in Greece.

The agencies claim BTC-e, which was founded in 2011, blatantly ignored "know your customer" laws in order to cater to a criminal customer base, and even hosted message boards buzzing with illegal activities. According to a Justice Department press release:

BTC-e .. was heavily reliant on criminals, including by not requiring users to validate their identity, obscuring and anonymizing transactions and source of funds, and by lacking any anti-money laundering processes. The indictment alleges BTC-e was operated to facilitate transactions for cybercriminals worldwide and received the criminal proceeds of numerous computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials, and narcotics distribution rings.

Instead of acting to prevent money laundering, BTC-e and its operators embraced the pervasive criminal activity conducted at the exchange. Users openly and explicitly discussed criminal activity on BTC-e’s user chat. [my emphasis]

The charges against Vinnik also accuse him of helping to orchestrate the hack of Mt. Gox, which was once the most popular digital currency exchange, but shut down in 2014 following a after a massive series of mysterious robberies.

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Wednesday's news comes as a reminder that, even as mainstream investors like hedge funds and venture capitalists rush to acquire digital currencies, many of the currencies' core users are still criminal networks.

As for BTC-e, a message from its Twitter account says the site will be down for five to 10 days, though many on social media are speculating its gone for good.

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