A Russian man who “directed and supervised” the operations of a popular bitcoin exchange known as BTC-E has been indicted on a range of charges. He was arrested recently in Greece.
The federal indictment, which was just unsealed in California, claims that BTC-E was the nexus for several criminal enterprises. The site allegedly facilitated ransomware, identity theft, drug trafficking, money laundering and public corruption, among others. The indictment also claims the director had co-conspirators.
According to a New York Times analysis of the indictment, BTC-E and/or its director may have been responsible for the hacking intrusion and theft of bitcoin that led to the bankruptcy of another bitcoin exchange called Mt. Gox in 2014. That year, the CEO of Mt. Gox admitted that hackers had stolen over 800,000 bitcoins, although it later recovered a portion of that number.
The indictment describes hundreds of thousands of bitcoins being moved from Mt. Gox directly into accounts at BTC-E that were controlled by its director. Those bitcoins were then moved to another currency exchange known as Bitstamp and traded for ordinary currency. That currency was allegedly deposited in accounts owned by BTC-E’s director. These activities took place between September 2011 and 2014, according to a third-party investigator.
Since BTC-E was founded in 2011, illegal activities may have begun right away, if the government is correct in its assertions. However, 2011 was also the year when bitcoin began to be widely considered valuable currency.
The government asserts that other money laundering took place on the site, as well. According to the indictment, the site may have laundered over $4 billion on behalf of criminals who had either stolen or extorted bitcoin from others. The bitcoin would be converted into traditional currency using shell bank accounts.
BTC-E site administrators had noted to customers that the site was down last week, just before the indictment was unsealed, but they said they expected to be able to get it back up. Also last week, U.S. and European law enforcement discovered and pulled down two large online exchanges for illegal drugs, AlphaBay and Hansa Market, and arrested their operators.
BTC-E apparently served some 700,000 worldwide customers before it was shut down.