The Department of Justice has today disclosed charges pertaining to the 2011 cyber attack on the cryptocurrency exchange Mt. Gox and the operation of the unlawful cryptocurrency exchange BTC-e. As per court documents, Russian nationals Alexey Bilyuchenko, aged 43, and Aleksandr Verner, aged 29, are accused of laundering around 647,000 bitcoins from their hack of Mt. Gox. Additionally, Bilyuchenko is charged with conspiring with Alexander Vinnik to operate BTC-e from 2011 to 2017.
Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division stated, "This announcement signifies a significant milestone in two major cryptocurrency investigations. As alleged in the indictments, commencing in 2011, Bilyuchenko and Verner stole a substantial amount of cryptocurrency from Mt. Gox, contributing to the exchange's eventual insolvency. With the illicit gains from Mt. Gox, Bilyuchenko proceeded to assist in the establishment of the infamous BTC-e virtual currency exchange, which laundered funds for cyber criminals globally. These indictments underscore the department's steadfast commitment to bringing to justice malevolent actors in the cryptocurrency ecosystem and preventing the exploitation of the financial system."
Southern District of New York Indictment
As per court documents that were unsealed in the Southern District of New York (SDNY), in or around September 2011, Bilyuchenko, Verner, and their accomplices purportedly gained unauthorized access to the server that held the cryptocurrency wallets for Mt. Gox. At that time, Mt. Gox was the largest Bitcoin exchange globally, catering to thousands of users worldwide. The cryptocurrency wallets containing the customers' bitcoin and the corresponding private keys used to authorize bitcoin transfers from those wallets were stored on a computer server in Japan by Mt. Gox.
U.S. Attorney Damian Williams for the Southern District of New York stated, "As cybercriminals have become more sophisticated in their methods of thievery, our career prosecutors and law enforcement partners have also become experts in the latest technologies being abused for malicious purposes. As alleged, Alexey Bilyuchenko and Aleksandr Verner believed that they could outsmart the law by using sophisticated hacks to steal and launder massive amounts of cryptocurrency, a novel technology at the time. However, the charges unsealed today demonstrate our ability to tenaciously pursue these alleged criminals, no matter how complex their schemes, until they are brought to justice."
Bilyuchenko, Verner, and their accomplices purportedly utilized their unauthorized access to Mt. Gox's server to deceitfully transfer bitcoin from Mt. Gox's wallets to bitcoin addresses under the control of Bilyuchenko, Verner, and their co-conspirators. Between September 2011 and May 2014, Bilyuchenko, Verner, and their co-conspirators allegedly orchestrated the theft of no less than approximately 647,000 bitcoins from Mt. Gox, which constituted the majority of the bitcoins owned by Mt. Gox's clientele. The bulk of the stolen bitcoins were purportedly laundered through bitcoin addresses linked to accounts controlled by Bilyuchenko, Verner, and their co-conspirators at two other online bitcoin exchanges.
In furtherance of the purported money laundering scheme, Bilyuchenko, Verner, and their co-conspirators are alleged to have negotiated and executed a fraudulent contract (the "Advertising Contract") in or around April 2012. The contract was intended to provide advertising services to a Bitcoin brokerage service located in the Southern District of New York (the "New York Bitcoin Broker"). Under the guise of the Advertising Contract, Bilyuchenko and Verner allegedly made regular requests to the owner and operator of the New York Bitcoin Broker to transfer large sums of money into various offshore bank accounts, including those held by shell corporations controlled by Bilyuchenko, Verner, and their co-conspirators. The purpose of these transfers was to conceal and liquidate the bitcoins stolen from Mt. Gox. Between March 2012 and April 2013, the New York Bitcoin Broker allegedly transferred more than $6.6 million to overseas bank accounts controlled by the defendants. In exchange for these wire transfers, the New York Bitcoin Broker allegedly received "credit" on Exchange-1, through which Bilyuchenko, Verner, and their co-conspirators laundered more than 300,000 of the bitcoins stolen from Mt. Gox. The fraudulent Advertising Contract with the New York Bitcoin Broker allegedly facilitated the concealment and liquidation of bitcoins stolen through the Mt. Gox Hack.
Northern District of California Indictment
As per court documents that have been unsealed in the Northern District of California (NDCA), Bilyuchenko is alleged to have collaborated with Vinnik and others to operate the BTC-e exchange from 2011 until its closure by law enforcement in July 2017. During this period, BTC-e was one of the largest cryptocurrency exchanges globally and served as a primary means for cybercriminals worldwide to transfer, launder, and store the proceeds of their illegal activities.
U.S. Attorney Ismail J. Ramsey for the Northern District of California stated, "For years, Bilyuchenko and his co-conspirators operated a digital currency exchange that enabled criminals worldwide, including computer hackers, ransomware actors, narcotics rings, and corrupt public officials, to launder billions of dollars. The Department of Justice is committed to identifying cybercriminals, regardless of their location. Bilyuchenko and his co-conspirators will discover that the Department of Justice has a long reach and an even longer memory for crimes that harm our communities."
Robert Tripp, SAC of the FBI San Francisco Field Office, added, "Bilyuchenko conspired with Vinnik and others to create a lawless and anonymous space to serve cybercriminals and facilitate cryptocurrency laundering. FBI investigators were dedicated to exposing this activity through persistent investigation, technical expertise, and partnerships. We will continue to collaborate with our local and global law enforcement partners to identify, pursue, and apprehend criminals, regardless of their location or the time it takes."
BTC-e had over one million users worldwide, processed billions of dollars' worth of transactions, and moved millions of bitcoin in deposits and withdrawals. BTC-e received criminal proceeds from various computer intrusions and hacking incidents, ransomware events, identity theft schemes, corrupt public officials, and narcotics distribution rings.