The Financial Crimes Enforcement Network (FinCEN) announced today a $110,003,314 civil money penalty against one of bitcoin’s biggest exchange, BTC-e, “for willfully violating U.S. anti-money laundering (AML) laws.”
FinCEN says “BTC-e facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.”
Alexander Vinnik, a Russian national who FinCEN says was one of the operators of BTC-e, was fined $12 million for his role in BTC-e’s violations, FinCEN says.
Vinnik was arrested in Greece yesterday charged with laundering some $4 billion worth of bitcoins through BTC-e. US authorities are seeking his extradition.
He has been further accused by the former CEO of MT Gox, Mark Karpeles, of being the MT Gox thief, while US authorities seem to suggest his role was “only” to launder the stolen coins.
“We will hold accountable foreign-located money transmitters, including [digital] currency exchangers, that do business in the United States when they willfully violate U.S. anti-money laundering laws.
This action should be a strong deterrent to anyone who thinks that they can facilitate ransomware, dark net drug sales, or conduct other illicit activity using encrypted [digital] currency.
Treasury’s FinCEN team and our law enforcement partners will work with foreign counterparts across the globe to appropriately oversee [digital] currency exchangers and administrators who attempt to subvert U.S. law and avoid complying with U.S. AML safeguards,” Jamal El-Hindi, Acting Director for FinCEN, stated.
The agency has claimed global jurisdiction if US customers are served, stating “Regardless of [BTC-e’s] ownership or location, the company was required to comply with U.S. AML laws and regulations as a foreign-located MSB including AML program, MSB registration, suspicious activity reporting, and recordkeeping requirements.”
BTC-e generally had a reputation of being shady, which ironically led some to think it was safer than other exchanges, earning the trust of some and their trading volumes, with the exchange handling considerable sums of LTC in particular, but also bitcoin and other digital currencies.
FinCEN says “users openly and explicitly discussed criminal activity on BTC-e’s user chat. BTC-e’s customer service representatives offered advice on how to process and access money obtained from illegal drug sales on dark net markets like Silk Road, Hansa Market, and AlphaBay.”
BTC-e is accused by FinCEN of laundering “300,000 bitcoin in transactions traceable to the theft,” of MT Gox, as well as “at least $3 million of facilitated transactions tied to ransomware attacks.”
The fine of $110 million is not far off from around $160 million bitcoins that started moving around the same time BTC-e shut down and Vinnik was arrested.
US authorities, however, have made no statement regarding BTC-e’s assets, so it remains unclear whether they have been seized, are being seized, or will be seized.
As such, there is some confusion as to who is moving the funds and why, with some 560,000 bitcoins potentially identified as BTC-e’s, of which around 120,000 are potentially on the move.