US Department of Justice unveils full text: Two Russians stole 640,000 Bitcoins from Mt. Gox
US Department of Justice reveals: 2 Russians stole 640,000 Bitcoins from Mt. Gox.
Author: U.S. Department of Justice; Translation: Wu Shuo Blockchain
Bilyuchenko and Verner were charged in the Southern District of New York with conspiracy to launder approximately 647,000 bitcoins stolen from Mt. Gox in 2011 (the “SDNY Case”). Bilyuchenko was separately charged in the Northern District of California with conspiring with Alexander Vinnik to operate an unlicensed cryptocurrency exchange, BTC-e, from 2011 through 2017 (the “NDCA Case”). The SDNY Case has been assigned to U.S. District Judge P. Kevin Castel. The NDCA Case has been assigned to U.S. District Judge Chhabria.
“As the methods employed by cybercriminals grow more sophisticated, our career prosecutors and law enforcement partners have become experts in the use of new technologies being maliciously exploited,” said U.S. Attorney Damian Williams. “As alleged, Alexey Bilyuchenko and Aleksandr Verner thought that they could evade legal sanction by using sophisticated hacking techniques to steal and launder large amounts of cryptocurrency. This was a new technology at the time, but the public charges also demonstrate that no matter how elaborate their plans, we have the ability to tenaciously pursue these charged criminals until they are brought to justice.”
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“This statement marks important milestones in two significant cryptocurrency investigations,” said Assistant Attorney General Kenneth A. Polite, Jr. “As alleged in the indictments, beginning in 2011, Bilyuchenko and Verner stole massive amounts of cryptocurrency from Mt. Gox, leading to its eventual bankruptcy. Bilyuchenko is alleged to have used funds illegally obtained from Mt. Gox to continue his involvement in the nefarious cryptocurrency exchange BTC-e, laundering money for criminal actors around the world. These indictments highlight this Department’s unwavering commitment to prosecute wrongdoers in the cryptocurrency ecosystem and to prevent the abuse of our financial systems.”
Around September 2011, Bilyuchenko, Verner, and their co-conspirators gained unauthorized access to the servers storing Mt. Gox’s cryptocurrency wallets. At the time, Mt. Gox was the largest bitcoin exchange in the world, serving thousands of users worldwide, including in the Southern District of New York. Mt. Gox stored the cryptocurrency wallets containing its customers’ bitcoins and the corresponding private keys used to authorize transfers of bitcoins from those wallets on a computer server in Japan.
Bilyuchenko, Verner, and their co-conspirators fraudulently transferred bitcoins from Mt. Gox’s wallet to bitcoin addresses controlled by Bilyuchenko, Verner, and their co-conspirators, using unauthorized access to Mt. Gox’s servers. From at least September 2011 until at least May 2014, Bilyuchenko, Verner, and their co-conspirators caused at least approximately 647,000 bitcoins to be stolen from Mt. Gox, which were the vast majority of Mt. Gox’s customers’ bitcoins. Bilyuchenko, Verner, and their co-conspirators primarily laundered the majority of the bitcoins that they stole from Mt. Gox through bitcoin addresses associated with accounts controlled by Bilyuchenko, Verner, and their co-conspirators at two other online bitcoin exchanges (“Exchange-1” and “Exchange-2”), as well as a specific user account at Mt. Gox itself.
To further their money laundering plan, Bilyuchenko, Verner, and their co-conspirators negotiated and executed a fraudulent contract (the “Advertising Contract”) in or around April 2012 with a bitcoin broker service located in the Southern District of New York (the “New York Bitcoin Broker”). Under the guise of the Advertising Contract, to conceal and cash out the bitcoins stolen from Mt. Gox, Bilyuchenko and Verner regularly requested that the owner and operator of the New York Bitcoin Broker make large wire transfers to various offshore bank accounts controlled by Bilyuchenko, Verner, and their co-conspirators (including in the name of shell companies). Pursuant to these requests, from approximately March 2012 through approximately April 2013, the New York Bitcoin Broker wired over approximately $6.6 million to offshore bank accounts controlled by Bilyuchenko, Verner, and their co-conspirators. In exchange for the wire transfers, the New York Bitcoin Broker received “credits” on Exchange-1, through which Bilyuchenko, Verner, and their co-conspirators laundered over 300,000 bitcoins stolen from Mt. Gox. The fraudulent Advertising Contract with the New York Bitcoin Broker enabled Bilyuchenko, Verner, and their co-conspirators to conceal and cash out the bitcoins stolen through the Mt. Gox hack.
After the theft was exposed, Mt. Gox ceased operations in 2014.
Bilyuchenko operated the BTC-e cryptocurrency exchange with Alexander Vinnik and others from 2011 until it was shut down by law enforcement in July 2017. During this time, BTC-e was one of the largest cryptocurrency exchanges in the world and was one of the primary means by which cybercriminals around the world transferred, laundered, and stored the proceeds of their illegal activities.
BTC-e provided services to over a million users worldwide, transferring deposits and withdrawals worth millions of bitcoins and processing transactions worth billions of dollars. BTC-e was subject to numerous computer intrusions and hacking incidents, ransomware events, identity theft schemes, corrupt public officials, and drug distribution networks.
The SDNY indictment charges 43-year-old Bilyuchenko and 29-year-old Verner (both Russian citizens) with conspiracy to launder money. If convicted of the charges in the SDNY indictment, each defendant faces a maximum sentence of 20 years in prison.
The NDCA indictment charges Bilyuchenko with conspiracy to launder money and operating an unlicensed money service business. If convicted of the charges in the NDCA indictment, Bilyuchenko faces a maximum sentence of 25 years in prison.
The maximum potential sentences mentioned above are prescribed by Congress and are provided for informational purposes only, as any sentencing of the defendants will be determined by the judge.
U.S. Attorney Williams commended the work of the IRS-CI and FBI in the investigation of the SDNY case.
The SDNY case is being handled by the Complex Frauds and Cybercrime Unit of the U.S. Attorney’s Office for the Southern District of New York. Assistant U.S. Attorney Olga I. Zverovich is in charge of the prosecution of the SDNY case.
The NDCA case is being handled by the Corporate and Securities Fraud Section and the Computer Crime and Intellectual Property Section (“CCIPS”) of the U.S. Attorney’s Office for the Northern District of California. CCIPS Trial Attorney C. Alden Pelker and NDCA Assistant U.S. Attorney Claudia Quiroz, both members of the National Cryptocurrency Enforcement Team, and NDCA Assistant U.S. Attorney Katherine Lloyd-Lovett are prosecuting the case. The Federal Bureau of Investigation (FBI); IRS-CI Oakland Office and Cyber Crime Unit, located in Washington D.C.; the U.S. Secret Service Criminal Investigative Division; and Homeland Security Investigations are investigating the case. The Department of Justice’s Office of International Affairs provided valuable assistance.
The charges in the indictment are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.