$110 Million In Fines, FinCEN’s Landmark Enforcement Action Against A Foreign-Located MSB
Vinnik arrested in Greece last month
SAN FRANCISCO – The Department of the Treasury’s first action against a foreign-located business doing business in the U.S. saw a Russian national indicted by a Bay Area federal grand jury for money laundering, operating an unlicensed money service business (MSB), and a battery of additional charges.
Alexander Vinnik (37), owner/operator of a bitcoin exchange (BTC-e), was arrested in Greece last week. The Financial Crimes Enforcement Network (FinCEN) assessed a $12 million penalty against him for his role in the violations and schemes.
Working in coordination with the U.S. Attorney’s Office for the Northern District of California, FinCEN assessed a $110,003,314 civil money penalty against BTC-e a/k/a Canton Business Corporation (BTC-e) for willfully violating U.S. anti-money laundering (AML) laws.
The multi-agency probe included U.S. Immigration and Law Enforcement’s (ICE) Homeland Security Investigations (HSI).
Court documents show numerous withdrawals from BTC-e accounts going directly to Vinnick’s personal bank accounts. The indictment alleges that proceeds from well-known hacks and thefts from bitcoin exchanges were funded through a BTC-e administrator account associated with Vinnick as primary owner of BTC-e’s managing shell company, Canton Business Corporation.
BTC-e, an internet-based, foreign-located money transmitter founded in 2011, exchanges the convertible virtual currencies Bitcoin, Litecoin, Namecoin, Novacoin, Peercoin, Ethereum, and Dash. It is one of the largest virtual currency exchanges by volume in the world.
It allows users to trade in the digital currency ‘bitcoin’ with high levels of anonymity, and to obscure transactions and fund sources. The virtual currency, like cash, can also be used to facilitate illicit transactions and to launder criminal proceeds.
The indictment alleges BTC-e facilitated transactions for cybercriminals worldwide and received proceeds derived from computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials, and narcotics distribution rings. The investigation has revealed that BTC-e received more than $4 billion worth of bitcoin over the course of its operation.
Vinnick allegedly received funds from the infamous computer intrusion or ‘hack’ of Mt. Gox – an earlier digital currency exchange that eventually failed, in part due to losses attributable to hacking.
Charges include one count of operating an unlicensed money service business, one count of conspiracy to commit money laundering, 17 counts of money laundering, and two counts of engaging in unlawful monetary transactions.
“We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate U.S. AML laws,” said Acting FinCEN Director Jamal El-Hindi. “Today’s 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 virtual currency.
“BTC-e was noted for its role in numerous ransomware and other cyber-criminal activity; its take-down is a significant accomplishment, and should serve as a reminder of our global reach in combating transnational cybercrime,” said Special Agent in Charge of the USSS Criminal Investigative Division Michael D’Ambrosio.
Said Acting Assistant Attorney General Blanco, “The Criminal Division will work tirelessly to identify those who use technology to conduct and obscure their criminal activity, as we ensure there are no safe havens from U.S. justice for those who seek to victimize Americans.”