Russians charged in Mt. Gox Bitcoin heist and BTC-e money laundering

Mt. Gox, once the largest Bitcoin exchange in the world, collapsed in 2014 after the theft was discovered.

The United States Department of Justice (DoJ) has unsealed indictments charging Alexey Bilyuchenko and Aleksandr Verner, both Russian nationals, with involvement in the notorious Mt. Gox Bitcoin heist in 2011.

The accused individuals are alleged to have conspired to launder approximately 647,000 Bitcoins, the majority of which were stolen from Mt. Gox, a Japanese Bitcoin exchange, causing its ultimate collapse.

Additionally, Bilyuchenko is charged with operating an unlicensed money services business related to the establishment and operation of the BTC-e cryptocurrency exchange, which facilitated money laundering activities for cybercriminals globally.

The charges against Bilyuchenko and Verner were announced by various law enforcement agencies, including the Southern District of New York, the Northern District of California, the Internal Revenue Service-Criminal Investigation (IRS-CI), the Federal Bureau of Investigation (FBI), the U.S. Secret Service (USSS), and Homeland Security Investigations (HSI).

According to the indictments, Bilyuchenko, Verner, and their co-conspirators gained unauthorized access to Mt. Gox’s server, which held the cryptocurrency wallets of its customers.

This unauthorized access allowed them to fraudulently transfer bitcoins from Mt. Gox’s wallets to their own Bitcoin addresses. The stolen bitcoins, amounting to approximately 647,000, were then laundered through various means, including the establishment of the BTC-e exchange, where they could be exchanged for other cryptocurrencies or converted into fiat currencies.

It is worth noting that in July 2017, as reported by Hackread.com, Greek authorities managed to arrest Alexander Vinnik, who was 38 years old at that time, the co-owner of BTC-e over money laundering allegations. The authorities also suspected Vinnik’s involvement in the Mt. Gox hack.

The DoJ highlighted the significant impact of the defendants’ actions, as the stolen funds from Mt. Gox contributed to the exchange’s insolvency. With the ill-gotten gains, Bilyuchenko allegedly played a role in setting up the BTC-e exchange, which became a major hub for cybercriminals to launder their illicit proceeds.

The indictments further reveal that Bilyuchenko and Verner engaged in a money laundering scheme using an advertising contract with a New York-based bitcoin brokerage service. Through this scheme, wire transfers were made into offshore bank accounts controlled by the defendants, while the New York Bitcoin Broker received “credit” on Exchange-1, a platform used for laundering the stolen bitcoins.

Mt. Gox, once the largest bitcoin exchange in the world, collapsed in 2014 after the theft was discovered. Its CEO, Mark Karpelès, was later arrested and convicted in Japan on charges of data manipulation. The recent charges against Bilyuchenko and Verner shed further light on the sophisticated cybercriminal operations that led to Mt. Gox’s downfall.

If convicted, Bilyuchenko and Verner face severe penalties. Bilyuchenko faces a maximum prison sentence of 25 years for operating an unlicensed money services business in the Northern District of California and an additional 20 years for conspiracy to commit money laundering in the Southern District of New York. Verner faces a maximum sentence of 20 years if found guilty of conspiracy to commit money laundering in the Southern District of New York.

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I’m a student and cybersecurity writer. On a random Sunday, I am likely to be figuring out life and reading Kafka.