The Justice Department revealed charges against two Russian nationals, Alexey Bilyuchenko, 43, and Aleksandr Verner, 29, for their involvement in the 2011 hack of the crypto exchange Mt. Gox and the illegal operation of the crypto exchange BTC-e.
Court documents allege that Bilyuchenko and Verner conspired to launder about 647,000 bitcoins that they stole from Mt. Gox, which led to the exchange’s bankruptcy. Bilyuchenko is also accused of conspiring with Alexander Vinnik to run BTC-e from 2011 to 2017, which facilitated money laundering for cyber criminals worldwide.
“This announcement is a significant step in two major crypto investigations. As the indictments allege, Bilyuchenko and Verner hacked Mt. Gox in 2011 and took a huge amount of cryptocurrency, which they then used to launch the infamous BTC-e virtual currency exchange, which served as a laundering hub for cyber criminals,” said Assistant Attorney.
The Southern District of New York (SDNY) unsealed court documents that accuse Bilyuchenko, Verner, and their co-conspirators of hacking the server of Mt. Gox, the biggest Bitcoin exchange at the time, in or around September 2011. Mt. Gox kept the cryptocurrency wallets and the private keys of its customers’ bitcoin on a server in Japan.
“The FBI will not stop working with our U.S. government and international allies to track down and stop malicious cyber actors wherever they are,” said Assistant Director Bryan Vorndran of the FBI’s Cyber Division. “When cyber criminals commit fraud, such as hacking and illegally running cryptocurrency exchanges, it is vital that we make them pay and bring them to justice.”
Bilyuchenko, Verner, and their co-conspirators allegedly used their hack of Mt. Gox’s server to transfer bitcoin from Mt. Gox’s wallets to bitcoin addresses they owned. From September 2011 to at least May 2014, Bilyuchenko, Verner, and their co-conspirators allegedly stole at least about 647,000 bitcoins from Mt. Gox, which was most of the bitcoins owned by Mt. Gox’s customers. Bilyuchenko, Verner, and their co-conspirators allegedly cleaned most of the bitcoins they stole from Mt. Gox mainly through bitcoin addresses linked to accounts they had at two other online bitcoin exchanges.
“Cryptocurrency gives criminals a new way to steal and clean money, but they are still driven by greed and dishonesty,” said Chief Jim Lee of IRS Criminal Investigation (IRS-CI). “IRS-CI has the skills to follow the complicated financial trail left by criminals, and we are committed to making them pay for their crimes. IRS-CI is honored to work with our law enforcement partners to announce this indictment.”
To further their money laundering scheme, Bilyuchenko, Verner, and their co-conspirators allegedly made and signed a fake contract (the “Advertising Contract”) in or around April 2012 to provide supposed advertising services to a Bitcoin service that sold and bought bitcoins in the Southern District of New York (the “New York Bitcoin Broker”). Under the cover of the Advertising Contract, to hide and sell the bitcoins they stole from Mt. Gox, Bilyuchenko and Verner allegedly asked the owner and operator of the New York Bitcoin Broker to send large wire transfers to various foreign bank accounts, including some in the names of fake companies, owned by Bilyuchenko, Verner, and their co-conspirators. Following these requests, between in or around March 2012 and in or around April 2013, the New York Bitcoin Broker allegedly sent more than about $6.6 million to overseas bank accounts owned by Bilyuchenko, Verner, and their co-conspirators. In return for the wire transfers, the New York Bitcoin Broker allegedly got “credit” on Exchange-1, which Bilyuchenko, Verner, and their co-conspirators allegedly used to clean more than 300,000 of the bitcoins they stole from Mt. Gox. The fake Advertising Contract with the New York Bitcoin Broker allegedly helped Bilyuchenko, Verner, and their co-conspirators hide and sell bitcoins they stole through the Mt. Gox Hack.
Mt. Gox stopped working in 2014 after the theft was exposed.
The Northern District of California (NDCA) unsealed court documents that accuse Bilyuchenko of working with Vinnik and others to run the BTC-e exchange from 2011 until law enforcement closed it down in July 2017. During that time, BTC-e was one of the biggest cryptocurrency exchanges in the world and was one of the main ways that cyber criminals worldwide moved, cleaned, and stored the criminal money from their illegal activities.
BTC-e had over one million users around the world, handling millions of bitcoin in deposits and withdrawals, and processing transactions worth billions of dollars. BTC-e got criminal money from many computer hacks and intrusions, ransomware attacks, identity theft schemes, corrupt public officials, and drug trafficking rings.
“The Secret Service has a long history of chasing and catching those who try to abuse our financial systems and harm innocent victims,” said Special Agent in Charge William Mancino of the U.S. Secret Service’s Criminal Investigative Division. “Working with our local, state, and federal law enforcement partners, we will keep investigating criminal groups that operate in the changing cyber domain.”
“Homeland Security Investigations (HSI) keeps investigating cyber criminals who operate illegally in virtual spaces, and we are glad to have worked together with our law enforcement partners to bring these two individuals to justice,” said Acting Executive Associate Director Katrina W. Berger of HSI. “Our special agents keep investigating cross-border criminal groups that operate in new technologies, using our wide authorities to find and take down those behind complex crypto-scams.”
The SDNY indictment accuses Bilyuchenko and Verner of conspiracy to launder money. The NDCA indictment accuses Bilyuchenko of conspiracy to launder money and running a money services business without a license.