Russian nationals accused of Mt. Gox bitcoin heist, shifting stolen funds to BTC-e

The Justice Department is accusing two Russian nationals of being behind the headline-grabbing hack of Mt. Gox, the biggest cryptocurrency exchange from 2010 to 2013.

On Friday, the DOJ unsealed charges filed in 2019 against 43-year-old Alexey Bilyuchenko and 29-year-old Aleksandr Verner, accusing the two of stealing 647,000 bitcoins from Mt. Gox and using it to underpin the illicit cryptocurrency exchange BTC-e from 2011 to 2017.

Bilyuchenko is also being charged for running BTC-e with Alexander Vinnik, a Russian national extradited to the U.S. last August after a 2017 arrest in Greece. Vinnik is accused of laundering more than $4 billion of criminal proceeds through BTC-e.

Bilyuchenko and Verner are facing conspiracy to commit money laundering charges while Bilyuchenko is facing accusations of money laundering, conspiracy and operating an unlicensed money services business.

Assistant Attorney General Kenneth Polite said Bilyuchenko helped set up BTC-e in part to launder the funds that were stolen from Mt. Gox — an assessment others investigating the case have made previously.

“For years, Bilyuchenko and his co-conspirators allegedly operated a digital currency exchange that enabled criminals around the world — including computer hackers, ransomware actors, narcotics rings, and corrupt public officials — to launder billions of dollars,” said U.S. Attorney Ismail Ramsey.

Court documents unsealed in the Southern District of New York accuse Bilyuchenko, Verner and unnamed co-conspirators of hacking into the Japan-based computer servers holding the cryptocurrency wallets used by Mt. Gox customers.

The suspects transferred the funds from Mt. Gox’s wallets to bitcoin addresses controlled by Bilyuchenko, Verner and others, prosecutors said.

The Justice Department said the group siphoned the 647,000 bitcoins from Mt. Gox between September 2011 and May 2014, effectively wiping out the platform’s holdings of that currency. The platform shut down in 2014.

In April 2012, the group allegedly struck a deal with an unnamed bitcoin brokerage service to liquidate the stolen currency in exchange for large wire transfers to several offshore bank accounts.

Between March 2012 and April 2013, the brokerage transferred about $6.6 million to overseas bank accounts controlled by Bilyuchenko, Verner, and their co-conspirators.

In return, the brokerage got “credit” on another crypto platform controlled by the group. Bilyuchenko, Verner, and their co-conspirators allegedly laundered more than 300,000 bitcoin stolen from Mt. Gox on this unnamed crypto exchange.

For years, former Mt. Gox CEO Mark Karpeles faced accusations that he was behind the theft and collapse of the platform.

BTC-e laundering

In charges unsealed in the Northern District of California, Bilyuchenko is accused of working with Vinnik and others to run BTC-e until it was shut down by law enforcement in July 2017.

BTC-e was a hotbed for criminal activity according to the Justice Department, serving as “one of the primary ways by which cyber criminals around the world transferred, laundered, and stored the criminal proceeds of their illegal activities.”

The platform allegedly served more than one million users worldwide – helping launder the proceeds of “numerous computer intrusions and hacking incidents, ransomware events, identity theft schemes, corrupt public officials, and narcotics distribution rings.”

“As alleged, Alexey Bilyuchenko and Aleksandr Verner thought they could outsmart the law by using sophisticated hacks to steal and launder massive amounts of cryptocurrency, a novel technology at the time, but the charges unsealed demonstrate our ability to tenaciously pursue these alleged criminals, no matter how complex their schemes, until they are brought to justice,” said U.S. Attorney Damian Williams for the Southern District of New York.