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  • L Misthos and M Bacina

The regulatory sherpas scale the peaks with further Mt Gox related charges

The U.S. Department of Justice (DOJ) has recently unsealed an indictment against Russian nationals Alexey Bilyuchenko and Aleksandr Verner in a further enforcement in the long-running Mt Gox hack fallout. The duo is accused of orchestrating money-laundering in connection with the infamous 2011 Mt. Gox hack, which led to the theft of approximately 647,000 Bitcoin (BTC) tokens, and subsequently laundering the stolen assets through the now-defunct BTC-e digital asset exchange.

The Mt. Gox hack, one of the most notorious in the history of cryptocurrency, played a significant role in the exchange's downfall in 2014. The indictment alleges that the Russian nationals, along with their co-conspirators, gained unauthorised access to Mt. Gox's server, transferring stolen BTC to wallets under their control. The stolen funds were then allegedly laundered through accounts at BTC-e and the San Francisco-based Trade Hill exchange, which ceased operations in 2013.

Bilyuchenko is also implicated in assisting Alexander Vinnik, another Russian national, in operating BTC-e from 2011 to 2017. Mr Vinnik was recently sentenced to 5 years prison in France. The indictment further alleges that the accused used a fraudulent contract to conceal and liquidate their stolen tokens, convincing a New York-based Bitcoin brokerage service to wire over USD$6.6 million into various offshore bank accounts under their control.

The case is currently being handled by the U.S. Attorney’s Office for the Southern District of New York’s Complex Frauds and Cybercrime Unit, with assistance from the Federal Bureau of Investigation (FBI) and the Internal Revenue Service’s Criminal Investigation (IRS-CI) division.

The indictment was originally filed in December 2019, and it remains unclear why the charges have only now been made public. Neither Bilyuchenko nor Verner are currently in U.S. custody and their whereabouts is not clear. The DOJ's announcement also includes a second indictment, accusing Bilyuchenko of involvement with Vinnik and others in the operation of BTC-e from its 2011 launch to its shutdown by U.S. authorities in July 2017.

This indictment, filed in the Northern District of California (NDCA), clarifies Vinnik's role in BTC-e, including actions previously attributed to other individuals.

BTC-e hosted over 1 million customers during its peak with some customers using the exchange to launder criminal proceeds of illegal activities, according to the indictment. The indictment also claims a substantial portion of the proceeds of the CryptoWall ransomware scheme was sent to BTC-e.

The indictment alleges that the defendants intentionally created, structured, and operated BTC-e as a criminal business venture, with a complete disregard for anti-money laundering and Know Your Customer (KYC) controls. The U.S. Attorney’s Office for the NDCA is getting help from the FBI, the IRS-CI, as well as the Secret Service Investigative Division, and Homeland Security Investigations in this case.

This case marks a significant step in the ongoing efforts to bring to justice those involved in one of the largest cryptocurrency theft and money laundering operations in history and stands as an example of how the immutable trail of crypto transactions persists and can be used to identify wrongdoers long after the fact.


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