The U.S. Department of Justice (DOJ) has unsealed indictments related to the 2011 Mt. Gox crypto exchange hack. Two Russian nationals, Alexey Bilyuchenko and Aleksandr Verner, have been charged with hacking Mt. Gox in 2011.
Once the largest Bitcoin exchange in the world, Mt. Gox never recovered from the loss of assets and became insolvent in 2014.
Two Charged in 2011 Mt. Gox Hack
According to court documents that were unsealed on June 9, Verner and Bilyuchenko gained illegal access to Mt. Gox servers. From there, they allegedly stole users’ data and the private keys for the exchange’s crypto.
At the time, Mt. Gox was the largest Bitcoin exchange in existence, with thousands of users worldwide. The exchange stored the wallets and private keys for its customers’ Bitcoin on a server in Japan.
The indictment alleges that between 2011 and 2014, Verner, Bilyuchenko, and other unnamed co-conspirators funneled around 647,000 Bitcoins from Mt. Gox wallets.
However, Bilyuchenko was reportedly arrested in Russia in 2019, and Verner’s whereabouts are currently unknown.
BTC-e Exchange Used to Launder Stolen Bitcoin
Of the stolen funds, at least 300,000 of those coins went to BTC-e, the Justice Department reports. The FBI later shut down that exchange amid a slew of corruption, money laundering, and cybercrime accusations.
In a second indictment unsealed on Friday, the DOJ revealed that Bilyuchenko was also charged with administrating BTC-e. Alexander Vinnik is also named in the charges.
The indictment states that BTC-e was one of the primary ways cybercriminals around the world laundered their earnings.
The document states that the exchange received criminal proceeds from various hacking incidents, ransomware events, identity theft schemes, corrupt public officials, and narcotics distribution rings.
Commenting on the BTC-e case, Acting Executive Associate Director Katrina W. Berger of Homeland Security Investigations said:
“We are proud to have worked collaboratively with our law enforcement partners to bring these two individuals to justice […] our special agents continue to investigate transnational criminal organizations operating in emerging technologies, leveraging our broad authorities to identify, and dismantle those behind sophisticated crypto-scams.”
US Law Enforcement Cracks Down on Crypto Mixers
Berger’s comments highlight a recent crackdown on what are known as crypto mixers by U.S. law enforcement agencies. Mixers, also known as tumblers or blenders, combine crypto assets from different sources. They then typically transfer them between a network of wallets before redistributing them to their original owners, thus obfuscating the source.
Because they obscure the source of funds, mixers make it harder for investigators to follow the trail of cryptocurrencies such as those stolen from Mt. Gox.
Tornado Cash may have gotten shut down in the U.S., but there are still other platforms that can be used. Check out our guide here:
While masquerading as a legitimate crypto exchange, the unsealed indictment this week implies that BTC-e acted as a mixer for criminals.
Joining Berger, U.S. Attorney Ismail J. Ramsey for the Northern District of California remarked that the exchange enabled criminals to launder billions of dollars. He said these included computer hackers, ransomware actors, narcotics rings, and corrupt public officials.
While law enforcement agencies argue that crypto mixers help criminals launder their dirty money, privacy advocates often defend the technology.
And in the crypto space, plenty of legitimate voices defend the right to transact in private. Even big firms like Coinbase have come out in favor of crypto mixers. In April, the exchange announced that it would help finance a lawsuit attempting to reopen the crypto mixer Tornado Cash.
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