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Officials arrest suspect in $4 billion Bitcoin money laundering scheme

130 points by cszerzo 9y ago

celticninja 9y ago
They should at least say he is the owner of btc-e.com to give it context. The site was used by cyber criminals but it was also a legit operation, much like HSBC.
- vkou 9y ago
  I have a feeling that the informed, consenting adults who have funds in that exchange will soon discover exactly why dealing with an unregulated, secretive foreign financial company (Whose owners keep their identities secret, so that they won't be arrested) is a bad idea. HSBC has none of these properties (Which are more important to their legitimate users.)
  - deleted 9y ago
    [deleted]
  - sillysaurus3 9y ago
    If you're keeping coins on any exchange -- even Coinbase -- they are no longer your coins. You've just loaned them. And you may eventually discover why that is a very bad idea. No one thinks "It could happen to me" until it's too late. Stop keeping coins on exchanges. Stop using third party wallets and other software. If you want to invest in coins because they might go up, that might make sense, but at least treat it like a serious investment.
    - SomeStupidPoint 9y ago
      ...But my 'serious' investments are handled by accounts through third parties that mediate my purchases on the exchanges. They're probably even lending out 'my' shares. It's just a sign that cryptocurrencies are new (and insecure) that I can't do the same with them.
    - vkou 9y ago
      People who were only storing money in the exchange for the short term (To conduct trades) got robbed too. When I open a trading account on a stock exchange, it's not longer my money. I've loaned it. I do have more confidence that its owners won't be arrested for money laundering, followed by all my funds dissapearing to a Bahaman slush fund, though. In another thread (About the SEC regulating ICOs), there were a number of people encouraging investment into and downplaying the risk of unregulated, opaque financial securities ran by persons not based in the US. Rail against the SEC all you want, but events like this are why it exists. Fraud erodes trust in the market.
      - paulsutter 9y ago
        The brokerage only owns the stocks in your account if you enable margin on the account (you dont even need to use margin, if you enable margin they own what's in the account and if they go bankrupt your account is gone too). If you keep margin disabled, you'll eventually get it all back even if the brokerage goes bankrupt. During the financial crisis, I asked a broker to disable margin on my account (never used it anyway). It took weeks before that happened. Some "technical holdup" that they assured me had nothing to do with loaning or pledging the contents of my account.
    - joosters 9y ago
      If you're keeping coins on any exchange -- even Coinbase -- they are no longer your coins. You've just loaned them. And you may eventually discover why that is a very bad idea. Since you have to use an exchange to obtain or sell crypto currency, this 'advice' is just pointing out the terrible flaws in bitcoin/ethereum/whatever. There will be plenty of users who were in the middle of cashing in/cashing out and have now lost all their money, and you're just saying "it's your own fault"
      - cookiecaper 9y ago
        You don't have to use an exchange to obtain cryptocurrency. You have to use an exchange to convert conventional fiat money into cryptocurrency. If you buy or sell natively in bitcoin, you don't need an exchange. Currency exchangers have been around for a very long time and there's nothing inherently bad about depending on one. All the other currencies do.
      - nannal 9y ago
        Well you don't "have" to use an exchange, if you want to meet in person and hand me a big sack full of coins, or your car, I can transfer you bitcoin.
      - vertex-four 9y ago
        I've bought and sold cryptocurrency without using an exchange personally. It works fine.
    - cinquemb 9y ago
      Seems like people want to treat currencies the same way people have been used to thinking about what traditional banking has become today. For those among us that want to ignore the long history of banking and coinage in general, some depositors in greece may have recently seen similar analogues to why banking in a particular locale turned out to be a very bad idea. Though you'll have people debate the relatively philosophical differences all day compared to the parties who have ended up on the wrong sides of the above. What I'm more interested in is: how does all of this change the landscape of incentives of actors of all sizes, and what capabilities does it give to such that weren't accessible to such (or any) degree compared to before?
    - zimbatm 9y ago
      Same for PayPal accounts, this isn't limited to e-coins.
- joosters 9y ago
  Do you know for sure that this is related to btc-e ? It's the most likely suspect (it is currently 'down for maintenance' and it was started in 2011, the same year mentioned in the AP story), but I can't find any concrete evidence of who the owners of btc-e actually were. The site has always hidden its origins, and the only information I could find was that the founders' names are supposedly Aleksey and Alexander, based on https://www.coindesk.com/btc-e-recent-issues-caused-surge-users/ https://www.coindesk.com/btc-e-recent-issues-caused-surge-us...
  - r721 9y ago
    Another interesting coincidence - yesterday Forbes published article namedropping BTC-e in a really bad way: >As for where the criminals are cashing out, 95 per cent of ransom funds were cashed out at the Russian exchange BTC-E. That chimes with the indication that the biggest ransomware types are the produce of the biggest organized criminal gangs working out of Russia. https://www.forbes.com/sites/thomasbrewster/2017/07/25/google-ransomware-multi-million-dollar-business-with-locky-and-cerber/ https://www.forbes.com/sites/thomasbrewster/2017/07/25/googl...
  - celticninja 9y ago
    The only other possible bitcoin enterprise fitting their description may be bitmixer but I don't think it started in 2011 and I am certain it has not handled $4bn in transactions, btce probably has.
  - r721 9y ago
    Confirmed by Reuters now: >BREAKING: Russian man arrested in Greece connected to BTC-e cryptocurrency exchange - sources https://twitter.com/ReutersTech/status/890232366320553984 https://twitter.com/ReutersTech/status/890232366320553984 UPD >A Russian national arrested in Greece on Wednesday on suspicion of laundering criminal funds by switching them into bitcoins is a key person behind the BTC-e crypto-currency exchange, two sources close to the exchange told Reuters. http://www.reuters.com/article/us-greece-russia-arrest-bitcoin-idUSKBN1AB27W http://www.reuters.com/article/us-greece-russia-arrest-bitco...
    - 9y ago
- nthcolumn 9y ago
  LOL! HSBC: another convicted money launderer! (still are only alleged against this person).
  - nthcolumn 9y ago
    Not sure why the above fact is being discredited or not deemed as a worthy contribution to the conversation?
    - wongarsu 9y ago
      The fact is fine, the comment is bad. Starting comments with 'LOL!' doesn't fit with the usual style of hacker news (why is he even laughing???). Stating "another" and then immediately stating why it isn't "another" (an arrest is no conviction) sounds really manipulative. And the fact (that HSBC was involved in money laundering) was already heavily implied by the parent comment, making it less interesting as the only value of the comment.
      - nthcolumn 9y ago
        Heavily implied? I thought OP had merely chosen an unfortunate example which coincidentally turned out to be one of the biggest money-launderers and then was minded to state that the individual had not yet been convicted of that offense unlike HSBC. I'm not sure how it is manipulative - to what end? But I take it that I rather ruined the joke.
    - joosters 9y ago
      Because two wrongs don't make a right? Murders are news, people don't generally say "so what? someone has been murdered before" when there is a killing.
      - nthcolumn 9y ago
        Who was saying 'so what'? Certainly not me. I was amused by what was, apparently, an obvious joke.
- mikeyouse 9y ago
  The difference is always the proportion, obfuscating that is pretty dishonest. HSBC laundered something like $9 billion for the cartels from 2006 - 2009.[1] As of Dec 2009, they had $2.36 trillion in assets.[2] Money laundering is clearly illegal and $9 billion isn't a small amount of money, but their business wouldn't have changed at all without that 0.3% of dirty cash. You can absolutely make the case that the penalties should be larger (although $2 billion in fines is a pretty good start considering they didn't keep the deposited cash) and that executives should have criminal liability, but there's nuance to both of those things. There's just no comparison to BTC-E (or any of the darknet markets that people insist are 'just like' eBay) who solely exist to launder money and facilitate illegal goods. [1] - https://www.justice.gov/sites/default/files/opa/legacy/2012/12/11/dpa-attachment-a.pdf https://www.justice.gov/sites/default/files/opa/legacy/2012/... [2] - http://www.annualreports.com/HostedData/AnnualReportArchive/h/NYSE_HBC_2009.pdf http://www.annualreports.com/HostedData/AnnualReportArchive/...
  - celticninja 9y ago
    Btce didn't exist solely to launder no way though. It was used by many people to legally trade cryptos.
sjs382 9y ago
The timing of this and the bitmixer.io [0] voluntary shutdown a few days ago is a bit strange. 0: https://news.ycombinator.com/item?id=14843373 https://news.ycombinator.com/item?id=14843373
- joosters 9y ago
  Yes, the takedown of AlphaBay and Hansa darkmarkets, the bitmixer.io shutdown, the arrest of this guy and the BTC-e exchange 'down for maintenance' are all related, I would guess. The person arrested is allegedly named Alexander Vinnik, according to https://thebitcoinnews.com/alexander-vinnik-admin-btc-e-arrested-greece-4-billion-bitcoin-money-laundering/ https://thebitcoinnews.com/alexander-vinnik-admin-btc-e-arre... - but no idea where they got that name from.
  - r721 9y ago
    "Alexander Vinnik" comes from updated Reuters article (with photo): http://www.reuters.com/article/us-greece-russia-arrest-idUSKBN1AB1OP http://www.reuters.com/article/us-greece-russia-arrest-idUSK...
    - nannal 9y ago
      Worth noting that BTC-e owner's name was Alexander and he was supposedly Russian.
      - nannal 9y ago
        https://twitter.com/ReutersTech/status/890232366320553984 https://twitter.com/ReutersTech/status/890232366320553984 It's confirmed
        deleted 9y ago
        [deleted]
      - 0xbear 9y ago
        Vinnik is an Ukrainian last name. This by itself doesn't mean anything, he could still be Russian, but I wouldn't automatically assume so. Update: never mind, Russian press says he's Russian, a former employee of Skolkovo techno park.
rcarrigan87 9y ago
"Conventional financial institutions comply with anti-money laundering regulations that make it difficult for criminal organizations to use their payment infrastructure." Yes, yes of course. Just like how HSBC physically expanded their teller windows to make it easy for Mexican drug cartels to make cash deposits. https://www.theguardian.com/business/2012/jul/17/hsbc-executive-resigns-senate https://www.theguardian.com/business/2012/jul/17/hsbc-execut...
- samfriedman 9y ago
  >Just like how HSBC physically expanded their teller windows to make it easy for Mexican drug cartels to make cash deposits. I can't seem to find any mention of this in the linked article?
  - UseStrict 9y ago
    OP didn't link to the right article: https://www.theguardian.com/business/2012/dec/14/hsbc-money-laundering-fine-management https://www.theguardian.com/business/2012/dec/14/hsbc-money-...
    - rcarrigan87 9y ago
      My bad, thank you!
  - _e 9y ago
    The bank didn't adjust the teller windows but people designed boxes to perfectly fit through the teller windows. From a Rolling Stone article -- The banks' laundering transactions were so brazen that the NSA probably could have spotted them from space. Breuer admitted that drug dealers would sometimes come to HSBC's Mexican branches and "deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows."[0] [0] http://www.rollingstone.com/politics/news/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213 http://www.rollingstone.com/politics/news/outrageous-hsbc-se...
nubela 9y ago
This is the inherent problem with Bitcoin. It's just not anonymous! Imagine a dollar that has a history of every transaction written on it. Monero is the coin you want.
- repomies6999 9y ago
  So if the guy had ran a monero exchange he wouldn't have been arrested, I guess?
  - vocatus_gate 9y ago
    He's not wrong, Monero is the only crypto (currently) enforcing fully private transactions by default. In a reddit thread about the AB bust someone pointed out that they weren't able to determine the amount of Monero he had, vs. listing exact amounts of his Eth, zcash, etc. edit for clarification: I wasn't saying he wouldn't have been caught, only that Monero offers additional benefits beyond some of the other coins and help conceal transaction history.
    - MichaelBurge 9y ago
      Is that even in the case where the server is seized, or when "Dread Pirate Roberts" leaves his laptop with passwords & encryption keys open when being arrested? Or just by default if the attacker is looking at network activity but doesn't have access to the machine?
      - ringaroundthetx 9y ago
        The Monero daemon does not know what addresses the deposits came from. So even if the server was seized there would not be any information to glean about this. Withdrawals in the db may have addresses and amounts, although RingCT upgrades make this more and more useless, but even without RingCT the addresses do not correspond to any information in the blockchain. The best case law enforcement would have had, before RingCT is to have seized the database of several exchanges, where users transferred Monero directly between both exchanges and they could see addresses in both databases. In this respect, Monero is much more akin to accounts at financial institutions, where subpoenas are needed to glean any information at all. But further enhanced by retaining the individual control of private wallets that cryptocurrency allows, where financial institutions are an embellishment to temporary user experience problems.
grandalf 9y ago
Money "laundering" is used to hide transactions from view so that the parties involved in the transaction can avoid scrutiny or legal consequences for their actions. The DoD accounting scandal is an example of the US Government effectively laundering massive sums of money to evade accountability: http://www.cnn.com/2016/08/23/politics/us-army-audit-accounting-errors/index.html http://www.cnn.com/2016/08/23/politics/us-army-audit-account... Also, governments use other tactics that are illegal in the private sector extensively, such as fudging their accounting to hide market volatility. https://www.sec.gov/news/testimony/2006/ts061506cc.htm https://www.sec.gov/news/testimony/2006/ts061506cc.htm Governments care about private sector money laundering mainly because it can be used to conceal tax evasion. If drug lords and human traffickers simply paid their fair share of taxes chances are money laundering would not be on governments' radar.
- colechristensen 9y ago
  >If drug lords and human traffickers simply paid their fair share of taxes chances are money laundering would not be on governments' radar. This is a bit ridiculous. It's sometimes just more convenient to prosecute the side effects of crime than the crime itself. The financial system and regulations are set up in a way that makes it possible to catch and imprison criminals solely for their use of legitimate banking for their illicit activity. It adds a net to improve capture. You don't put out mousetraps to protect the bait.
- MichaelGG 9y ago
  What? Laundering often ends up with them paying taxes - for instance by putting tons of cash through a laundromat. Taxes then paid, the criminals are free to spend it as they wish. In fact, that's like, sort of the entire point of it. Money laundering (as an offence) is just a crude tool to make prosecutor's lives far, far, easier.
  - mistermann 9y ago
    I suspect this is what's happening in Canada - billions of dollars of "under the radar" money is coming into Canada to buy real estate, but the construction & trades jobs it creates and resulting boost it provides to GDP makes the government happy to turn a blind eye to the source of this money or that they make no direct taxation revenue (and refuse to audit certain people who are obviously breaking the law).
Murkin 9y ago
So they arrested him for running BTC-E and claim the exchange is a money laundering scheme?
- the_cat_kittles 9y ago
  easy for me to believe, the whole thing was so scammy. that chat was hilariously progandistic
- vkou 9y ago
  Not necessarilly. It could be that some of BTC-E's activities/his non BTC-E activities may have been money laundering. For example, if you run a USD-BTC exchange, and I mail you a suitcase full of money, then withdraw it as BTC, you would almost certainly be aiding money laundering.
deleted 9y ago
[deleted]
ryanlol 9y ago
Media outlets claiming that the arrested guy is also a suspect for MtGox theft. https://twitter.com/coindesk/status/890256080965599232 https://twitter.com/coindesk/status/890256080965599232 I've personally looked at BTC-e's trade histories and am not inclined to believe this. BTC-e's weak security track record also doesn't exactly support this theory either. EDIT: I guess wizsec came through http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html >To be clear, this investigation turned up evidence to identify Vinnik not as a hacker/thief but as a money launderer; his arrest news also suggests this is what he is being suspected for. He may have merely bought cheap coins from thieves and offered a laundering service. He is, however, a crucial piece of the puzzle, as he will have likely known who he was dealing with and laundering for, and so represents a major breakthrough in the case. We assume that law enforcement will now be taking the appropriate next steps to pursue all the remaining angles and hopefully identify the other individuals involved as well.
seanwasere 9y ago
bitcoin is data, so i guess btce are guilty of allowing people to buy and sell data,
mads 9y ago
Weird that https://www.xbtce.com https://www.xbtce.com is still running. Seems there are very few trades (3 in the last hour) being made but the "order book" is flashing away like nothing is wrong. Chat is also dead...
- jameskegel 9y ago
  Lots of exchanges get caught eventually doing what your posts suggest BTCe is doing
deleted 9y ago
[deleted]
t3ra 9y ago
http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html He is guy who has been identified in MtGox hacking
dang 9y ago
Related discussion at https://news.ycombinator.com/item?id=14858495 https://news.ycombinator.com/item?id=14858495.

130 points by cszerzo 9y ago

They should at least say he is the owner of btc-e.com to give it context. The site was used by cyber criminals but it was also a legit operation, much like HSBC.

vkou 9y ago
I have a feeling that the informed, consenting adults who have funds in that exchange will soon discover exactly why dealing with an unregulated, secretive foreign financial company (Whose owners keep their identities secret, so that they won't be arrested) is a bad idea. HSBC has none of these properties (Which are more important to their legitimate users.)
- deleted 9y ago
  [deleted]
- sillysaurus3 9y ago
  If you're keeping coins on any exchange -- even Coinbase -- they are no longer your coins. You've just loaned them. And you may eventually discover why that is a very bad idea. No one thinks "It could happen to me" until it's too late. Stop keeping coins on exchanges. Stop using third party wallets and other software. If you want to invest in coins because they might go up, that might make sense, but at least treat it like a serious investment.
  - SomeStupidPoint 9y ago
    ...But my 'serious' investments are handled by accounts through third parties that mediate my purchases on the exchanges. They're probably even lending out 'my' shares. It's just a sign that cryptocurrencies are new (and insecure) that I can't do the same with them.
  - vkou 9y ago
    People who were only storing money in the exchange for the short term (To conduct trades) got robbed too. When I open a trading account on a stock exchange, it's not longer my money. I've loaned it. I do have more confidence that its owners won't be arrested for money laundering, followed by all my funds dissapearing to a Bahaman slush fund, though. In another thread (About the SEC regulating ICOs), there were a number of people encouraging investment into and downplaying the risk of unregulated, opaque financial securities ran by persons not based in the US. Rail against the SEC all you want, but events like this are why it exists. Fraud erodes trust in the market.
    - paulsutter 9y ago
      The brokerage only owns the stocks in your account if you enable margin on the account (you dont even need to use margin, if you enable margin they own what's in the account and if they go bankrupt your account is gone too). If you keep margin disabled, you'll eventually get it all back even if the brokerage goes bankrupt. During the financial crisis, I asked a broker to disable margin on my account (never used it anyway). It took weeks before that happened. Some "technical holdup" that they assured me had nothing to do with loaning or pledging the contents of my account.
  - joosters 9y ago
    If you're keeping coins on any exchange -- even Coinbase -- they are no longer your coins. You've just loaned them. And you may eventually discover why that is a very bad idea. Since you have to use an exchange to obtain or sell crypto currency, this 'advice' is just pointing out the terrible flaws in bitcoin/ethereum/whatever. There will be plenty of users who were in the middle of cashing in/cashing out and have now lost all their money, and you're just saying "it's your own fault"
    - cookiecaper 9y ago
      You don't have to use an exchange to obtain cryptocurrency. You have to use an exchange to convert conventional fiat money into cryptocurrency. If you buy or sell natively in bitcoin, you don't need an exchange. Currency exchangers have been around for a very long time and there's nothing inherently bad about depending on one. All the other currencies do.
    - nannal 9y ago
      Well you don't "have" to use an exchange, if you want to meet in person and hand me a big sack full of coins, or your car, I can transfer you bitcoin.
    - vertex-four 9y ago
      I've bought and sold cryptocurrency without using an exchange personally. It works fine.
  - cinquemb 9y ago
    Seems like people want to treat currencies the same way people have been used to thinking about what traditional banking has become today. For those among us that want to ignore the long history of banking and coinage in general, some depositors in greece may have recently seen similar analogues to why banking in a particular locale turned out to be a very bad idea. Though you'll have people debate the relatively philosophical differences all day compared to the parties who have ended up on the wrong sides of the above. What I'm more interested in is: how does all of this change the landscape of incentives of actors of all sizes, and what capabilities does it give to such that weren't accessible to such (or any) degree compared to before?
  - zimbatm 9y ago
    Same for PayPal accounts, this isn't limited to e-coins.
joosters 9y ago
Do you know for sure that this is related to btc-e ? It's the most likely suspect (it is currently 'down for maintenance' and it was started in 2011, the same year mentioned in the AP story), but I can't find any concrete evidence of who the owners of btc-e actually were. The site has always hidden its origins, and the only information I could find was that the founders' names are supposedly Aleksey and Alexander, based on https://www.coindesk.com/btc-e-recent-issues-caused-surge-users/ https://www.coindesk.com/btc-e-recent-issues-caused-surge-us...
- r721 9y ago
  Another interesting coincidence - yesterday Forbes published article namedropping BTC-e in a really bad way: >As for where the criminals are cashing out, 95 per cent of ransom funds were cashed out at the Russian exchange BTC-E. That chimes with the indication that the biggest ransomware types are the produce of the biggest organized criminal gangs working out of Russia. https://www.forbes.com/sites/thomasbrewster/2017/07/25/google-ransomware-multi-million-dollar-business-with-locky-and-cerber/ https://www.forbes.com/sites/thomasbrewster/2017/07/25/googl...
- celticninja 9y ago
  The only other possible bitcoin enterprise fitting their description may be bitmixer but I don't think it started in 2011 and I am certain it has not handled $4bn in transactions, btce probably has.
- r721 9y ago
  Confirmed by Reuters now: >BREAKING: Russian man arrested in Greece connected to BTC-e cryptocurrency exchange - sources https://twitter.com/ReutersTech/status/890232366320553984 https://twitter.com/ReutersTech/status/890232366320553984 UPD >A Russian national arrested in Greece on Wednesday on suspicion of laundering criminal funds by switching them into bitcoins is a key person behind the BTC-e crypto-currency exchange, two sources close to the exchange told Reuters. http://www.reuters.com/article/us-greece-russia-arrest-bitcoin-idUSKBN1AB27W http://www.reuters.com/article/us-greece-russia-arrest-bitco...
  - 9y ago
nthcolumn 9y ago
LOL! HSBC: another convicted money launderer! (still are only alleged against this person).
- nthcolumn 9y ago
  Not sure why the above fact is being discredited or not deemed as a worthy contribution to the conversation?
  - wongarsu 9y ago
    The fact is fine, the comment is bad. Starting comments with 'LOL!' doesn't fit with the usual style of hacker news (why is he even laughing???). Stating "another" and then immediately stating why it isn't "another" (an arrest is no conviction) sounds really manipulative. And the fact (that HSBC was involved in money laundering) was already heavily implied by the parent comment, making it less interesting as the only value of the comment.
    - nthcolumn 9y ago
      Heavily implied? I thought OP had merely chosen an unfortunate example which coincidentally turned out to be one of the biggest money-launderers and then was minded to state that the individual had not yet been convicted of that offense unlike HSBC. I'm not sure how it is manipulative - to what end? But I take it that I rather ruined the joke.
  - joosters 9y ago
    Because two wrongs don't make a right? Murders are news, people don't generally say "so what? someone has been murdered before" when there is a killing.
    - nthcolumn 9y ago
      Who was saying 'so what'? Certainly not me. I was amused by what was, apparently, an obvious joke.
mikeyouse 9y ago
The difference is always the proportion, obfuscating that is pretty dishonest. HSBC laundered something like $9 billion for the cartels from 2006 - 2009.[1] As of Dec 2009, they had $2.36 trillion in assets.[2] Money laundering is clearly illegal and $9 billion isn't a small amount of money, but their business wouldn't have changed at all without that 0.3% of dirty cash. You can absolutely make the case that the penalties should be larger (although $2 billion in fines is a pretty good start considering they didn't keep the deposited cash) and that executives should have criminal liability, but there's nuance to both of those things. There's just no comparison to BTC-E (or any of the darknet markets that people insist are 'just like' eBay) who solely exist to launder money and facilitate illegal goods. [1] - https://www.justice.gov/sites/default/files/opa/legacy/2012/12/11/dpa-attachment-a.pdf https://www.justice.gov/sites/default/files/opa/legacy/2012/... [2] - http://www.annualreports.com/HostedData/AnnualReportArchive/h/NYSE_HBC_2009.pdf http://www.annualreports.com/HostedData/AnnualReportArchive/...
- celticninja 9y ago
  Btce didn't exist solely to launder no way though. It was used by many people to legally trade cryptos.

sjs382 9y ago

The timing of this and the bitmixer.io [0] voluntary shutdown a few days ago is a bit strange. 0: https://news.ycombinator.com/item?id=14843373 https://news.ycombinator.com/item?id=14843373

joosters 9y ago
Yes, the takedown of AlphaBay and Hansa darkmarkets, the bitmixer.io shutdown, the arrest of this guy and the BTC-e exchange 'down for maintenance' are all related, I would guess. The person arrested is allegedly named Alexander Vinnik, according to https://thebitcoinnews.com/alexander-vinnik-admin-btc-e-arrested-greece-4-billion-bitcoin-money-laundering/ https://thebitcoinnews.com/alexander-vinnik-admin-btc-e-arre... - but no idea where they got that name from.
- r721 9y ago
  "Alexander Vinnik" comes from updated Reuters article (with photo): http://www.reuters.com/article/us-greece-russia-arrest-idUSKBN1AB1OP http://www.reuters.com/article/us-greece-russia-arrest-idUSK...
  - nannal 9y ago
    Worth noting that BTC-e owner's name was Alexander and he was supposedly Russian.
    - nannal 9y ago
      https://twitter.com/ReutersTech/status/890232366320553984 https://twitter.com/ReutersTech/status/890232366320553984 It's confirmed
      - deleted 9y ago
        [deleted]
    - 0xbear 9y ago
      Vinnik is an Ukrainian last name. This by itself doesn't mean anything, he could still be Russian, but I wouldn't automatically assume so. Update: never mind, Russian press says he's Russian, a former employee of Skolkovo techno park.

rcarrigan87 9y ago

"Conventional financial institutions comply with anti-money laundering regulations that make it difficult for criminal organizations to use their payment infrastructure." Yes, yes of course. Just like how HSBC physically expanded their teller windows to make it easy for Mexican drug cartels to make cash deposits. https://www.theguardian.com/business/2012/jul/17/hsbc-executive-resigns-senate https://www.theguardian.com/business/2012/jul/17/hsbc-execut...

samfriedman 9y ago
>Just like how HSBC physically expanded their teller windows to make it easy for Mexican drug cartels to make cash deposits. I can't seem to find any mention of this in the linked article?
- UseStrict 9y ago
  OP didn't link to the right article: https://www.theguardian.com/business/2012/dec/14/hsbc-money-laundering-fine-management https://www.theguardian.com/business/2012/dec/14/hsbc-money-...
  - rcarrigan87 9y ago
    My bad, thank you!
- _e 9y ago
  The bank didn't adjust the teller windows but people designed boxes to perfectly fit through the teller windows. From a Rolling Stone article -- The banks' laundering transactions were so brazen that the NSA probably could have spotted them from space. Breuer admitted that drug dealers would sometimes come to HSBC's Mexican branches and "deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows."[0] [0] http://www.rollingstone.com/politics/news/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213 http://www.rollingstone.com/politics/news/outrageous-hsbc-se...

nubela 9y ago

This is the inherent problem with Bitcoin. It's just not anonymous! Imagine a dollar that has a history of every transaction written on it. Monero is the coin you want.

repomies6999 9y ago
So if the guy had ran a monero exchange he wouldn't have been arrested, I guess?
- vocatus_gate 9y ago
  He's not wrong, Monero is the only crypto (currently) enforcing fully private transactions by default. In a reddit thread about the AB bust someone pointed out that they weren't able to determine the amount of Monero he had, vs. listing exact amounts of his Eth, zcash, etc. edit for clarification: I wasn't saying he wouldn't have been caught, only that Monero offers additional benefits beyond some of the other coins and help conceal transaction history.
  - MichaelBurge 9y ago
    Is that even in the case where the server is seized, or when "Dread Pirate Roberts" leaves his laptop with passwords & encryption keys open when being arrested? Or just by default if the attacker is looking at network activity but doesn't have access to the machine?
    - ringaroundthetx 9y ago
      The Monero daemon does not know what addresses the deposits came from. So even if the server was seized there would not be any information to glean about this. Withdrawals in the db may have addresses and amounts, although RingCT upgrades make this more and more useless, but even without RingCT the addresses do not correspond to any information in the blockchain. The best case law enforcement would have had, before RingCT is to have seized the database of several exchanges, where users transferred Monero directly between both exchanges and they could see addresses in both databases. In this respect, Monero is much more akin to accounts at financial institutions, where subpoenas are needed to glean any information at all. But further enhanced by retaining the individual control of private wallets that cryptocurrency allows, where financial institutions are an embellishment to temporary user experience problems.

grandalf 9y ago

Money "laundering" is used to hide transactions from view so that the parties involved in the transaction can avoid scrutiny or legal consequences for their actions. The DoD accounting scandal is an example of the US Government effectively laundering massive sums of money to evade accountability: http://www.cnn.com/2016/08/23/politics/us-army-audit-accounting-errors/index.html http://www.cnn.com/2016/08/23/politics/us-army-audit-account... Also, governments use other tactics that are illegal in the private sector extensively, such as fudging their accounting to hide market volatility. https://www.sec.gov/news/testimony/2006/ts061506cc.htm https://www.sec.gov/news/testimony/2006/ts061506cc.htm Governments care about private sector money laundering mainly because it can be used to conceal tax evasion. If drug lords and human traffickers simply paid their fair share of taxes chances are money laundering would not be on governments' radar.

colechristensen 9y ago
>If drug lords and human traffickers simply paid their fair share of taxes chances are money laundering would not be on governments' radar. This is a bit ridiculous. It's sometimes just more convenient to prosecute the side effects of crime than the crime itself. The financial system and regulations are set up in a way that makes it possible to catch and imprison criminals solely for their use of legitimate banking for their illicit activity. It adds a net to improve capture. You don't put out mousetraps to protect the bait.
MichaelGG 9y ago
What? Laundering often ends up with them paying taxes - for instance by putting tons of cash through a laundromat. Taxes then paid, the criminals are free to spend it as they wish. In fact, that's like, sort of the entire point of it. Money laundering (as an offence) is just a crude tool to make prosecutor's lives far, far, easier.
- mistermann 9y ago
  I suspect this is what's happening in Canada - billions of dollars of "under the radar" money is coming into Canada to buy real estate, but the construction & trades jobs it creates and resulting boost it provides to GDP makes the government happy to turn a blind eye to the source of this money or that they make no direct taxation revenue (and refuse to audit certain people who are obviously breaking the law).

Murkin 9y ago

So they arrested him for running BTC-E and claim the exchange is a money laundering scheme?

the_cat_kittles 9y ago
easy for me to believe, the whole thing was so scammy. that chat was hilariously progandistic
vkou 9y ago
Not necessarilly. It could be that some of BTC-E's activities/his non BTC-E activities may have been money laundering. For example, if you run a USD-BTC exchange, and I mail you a suitcase full of money, then withdraw it as BTC, you would almost certainly be aiding money laundering.

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ryanlol 9y ago

Media outlets claiming that the arrested guy is also a suspect for MtGox theft. https://twitter.com/coindesk/status/890256080965599232 https://twitter.com/coindesk/status/890256080965599232 I've personally looked at BTC-e's trade histories and am not inclined to believe this. BTC-e's weak security track record also doesn't exactly support this theory either. EDIT: I guess wizsec came through http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html >To be clear, this investigation turned up evidence to identify Vinnik not as a hacker/thief but as a money launderer; his arrest news also suggests this is what he is being suspected for. He may have merely bought cheap coins from thieves and offered a laundering service. He is, however, a crucial piece of the puzzle, as he will have likely known who he was dealing with and laundering for, and so represents a major breakthrough in the case. We assume that law enforcement will now be taking the appropriate next steps to pursue all the remaining angles and hopefully identify the other individuals involved as well.

seanwasere 9y ago

bitcoin is data, so i guess btce are guilty of allowing people to buy and sell data,

mads 9y ago

Weird that https://www.xbtce.com https://www.xbtce.com is still running. Seems there are very few trades (3 in the last hour) being made but the "order book" is flashing away like nothing is wrong. Chat is also dead...

jameskegel 9y ago
Lots of exchanges get caught eventually doing what your posts suggest BTCe is doing

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t3ra 9y ago

http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html He is guy who has been identified in MtGox hacking

dang 9y ago

Related discussion at https://news.ycombinator.com/item?id=14858495 https://news.ycombinator.com/item?id=14858495.