Bitcoin expert sentenced to 5 years for money laundering
A Paris court sentenced Russian computer expert Alexander Vinnik to 5 years in prison this week over his role in laundering cryptocurrency for ransomware hackers.
The case focused on Vinnik’s hand in crypto exchange BTC-e, which served as a discrete platform for exchanging cryptocurrency for fiat between 2011 and 2017.
What made BTC-e different? Unlike today’s exchanges that offer fiat services, BTC-e didn’t collect user identity information.
Lawyers say its notoriously lax KYC methods facilitated money laundering and other dodgy dealings, but it was also regarded as a legitimate part of the industry.
CoinDesk even used it in early versions of its Bitcoin price index to find a ‘true’ price for BTC across top exchanges.
In 2015 it was reportedly responsible for 3% of all Bitcoin trade, and in 2017 researchers estimated some 95% of all ransomware payments to date had been washed via the exchange.
Remember Mt. Gox? Prosecutors in the US suspect one third of the Bitcoin stolen from Mt. Gox in 2014 may have been cashed out via BTC-e, which at today’s prices would be worth around $5.7 billion.
US authorities seized the domain and directed Greek police to arrest Vinnik while on holiday in 2017, charging the BTC-e co-founder with laundering $4 billion in illicit funds.
Vinnik was extradited to France in January after the country won a two-year legal threeway with the US and Russia where he’s wanted on different sets of charges.
So, what did Vinnik do? Vinnik was found guilty of washing dirty Bitcoin on behalf of the hacking crew behind the “Locky” malware that hit a raft of French and German targets between 2016 and 2018.
Prosecutors tried to prove Vinnik was actually the mastermind behind Locky, but in the end just one of the 14 charges stuck (money laundering).
Charges dodged reportedly include extortion, association with a criminal enterprise, and the facilitation of drug trafficking.
Vinnik has always maintained his innocence, describing himself as an independent contractor that acted on instruction of more senior BTC-e employees. He even went on hunger strike… twice.
What happens now? Well, Vinnik goes back to French prison. But, he’s already served three out of the five years in custody.
Vinnik’s legal defense is said to be considering an appeal, and will potentially argue that Bitcoin isn’t real money, so it can’t be laundered.
There’s also talk that Russia may look to bring Vinnik back to home soil to prevent him from ending up in the hands of the US after his current sentence is up.