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The Greek resort of Halkidiki. Russian citizen Alexander Vinnik, 38, on holiday with his family. A cool sea breeze flowing in through the window. And a line of special agents bursting through the door. According to investigatorsit all began in bulgaria cyprus bitcoin he opened the exchange and money stolen from competitors was stashed in its accounts.
Back then little was publicly known about the owners of BTC-e. People just spoke of two administrators cum programmers bulgaria cyprus bitcoin Alexander and Alexei who worked in Skolkovo Russia's equivalent of Silicon Valley.
After being blocked by the authorities it quickly obtained "mirrors" duplicate servers and managed to hold on to the majority of its users. Community board of directors and technical director at the Safello Exchange.
In Russia, cryptocurrencies - bitcoins in particular - were associated with drugs, pornography, and arms trafficking, which is why those who created such platforms chose to remain anonymous. In his words, the platform had a good reputation in the business world and large companies used it, "but this exchange always worked in the gray zone and it didn't have bulgaria cyprus bitcoin permits to conduct financial activity.
Representatives of the sector said that the exchange bulgaria cyprus bitcoin registered in Cyprus, its servers in Bulgaria, and several banks are involved in operations, one of which is in the Czech Republic. Alexander Vinnik, suspected of running a money laundering operation, is escorted by a plain-clothes police officer to a court in Thessaloniki, July 26, Bulgaria cyprus bitcoin appeal because mediators banks and brokers are cut out of transactions.
The transfer from one wallet to another also remains anonymous. Department of Justice believes bulgaria cyprus bitcoin Vinnik's criminal career kicked off inwhen he established the exchange and the Mt. Gox rival exchange, based in Japan, began selling money. For several years, hackers regularly found a way into the electronic wallets of private individuals and organizations at Mt. Gox, until the largest exchange in the world up to 70 percent of all operations in cryptocurrency filed for bankruptcy.
As a group of investigators from WizSec Bitcoin Security Specialists was able to find outthe key figure behind these thefts was Bulgaria cyprus bitcoin Alexander Vinnik. The group analyzed the transactions and noticed that the stolen money including money from other exchanges had wound up in his so-called e-wallet. It has given all the information to the U.
The Russian denies all bulgaria cyprus bitcoin while BTC-e is temporarily not working. Bulgaria cyprus bitcoin exchange's twitter says that restoration work will bulgaria cyprus bitcoin conducted for five to 10 days.
Cryptocurrency fraud is still a unique story: But I'll go as bulgaria cyprus bitcoin to say that many of the operations are not related to money laundering. For now we shouldn't say that this type of fraud is very common," says general director of Zecurion Alexander Kovalev.
Each time money settled in his own wallet and was later moved to the BTC-e and other exchanges. What was the weak point of Vinnik's scheme?
Depending on how you look at it, it was actually a single theft. MtGox's private keys were compromised once, back in And they were later given to Vinnik who passed them through his wallets. The weakness was that after he received these bitcoins and laundered them he had to move them out to exchanges for selling and turning them into cash.
And that left traces that led a trail back to him. Why did he kept the funds in his own internal storage, and not spread them to other addresses? To some degree, whenever you use bitcoin, you scatter your funds between different addresses.
But unless you're careful, once you start spending them they become connected again. Because you see all the money flowing back to the same place. He definitely was not as cautious as he should have been. Once we learned where the coins coming out of Bulgaria cyprus bitcoin were going, it was easy to start grouping his addresses together and detecting his entire holdings over time.
As for why he wasn't more careful, I can only speculate. He probably didn't think it was necessary. I've been looking into the case since But it wasn't until or early that my investigation focused more on identifying those coins going out of MtGox. For the last year or so I've been aware of this evidence that implicates Vinnik and the scheme. It felt important not to go public too soon, it was better to keep investigating and making sure.
And also to avoid tipping anyone off. He actually used his bulgaria cyprus bitcoin name online, which bulgaria cyprus bitcoin a gap in security. I saw his name quite a while back but I assumed it was actually an alias since I didn't consider the possibility he would use his real name.
Only after his arrest did I realize it was actually his real name. What was his role bulgaria cyprus bitcoin this scheme? Is he a thief, a hacker, a man whose function is only to "launder" stolen goods, or a mastermind? Most evidence points to him being a money launderer.
But thinking a little bit beyond that, if you are a money launderer receiving these large amounts of money from thieves you have to have some sort of established relationship with them.
So I think that's going to be next couple of steps to sort out directly - how closely he bulgaria cyprus bitcoin with various hackers and was he directly involved with the thefts himself. I actually think it's been widespread for a few years now. Even going back to when this theft started in - it was a significant chunk of cryptocurrency bulgaria cyprus bitcoin - moving funds in a way that does not involve moving them through traditional banking systems.
In the years that have followed, the exchange rate of Bitcoin has increased dramatically and now it's worth a lot of money, which has attracted even more attention from current criminal elements. Not as much as you might think. I think Bitcoin would have been on the same path regardless of whether this bulgaria cyprus bitcoin.
It might have had an effect on price to some degree, because all of the funds that moved through this money laundering network were being sold back into the market. Maybe it was pushing the price down. Maybe after removing criminal elements from this market we will see prices increase. If using any of Russia Beyond's content, partly or in full, always provide an active hyperlink to the original material.
Alexander Vinnik, suspected bulgaria cyprus bitcoin running a money laundering operation. Creating an international scheme to legalize stolen money, bankrupting a large cryptocurrency exchange, helping hackers and drug dealers for seven years - all this, according to the U. How did Vinnik do it? When did you find him and begin to track his activity? How did you connect his nickname to his real name?
Is this type of fraud - laundering through bitcoins - now widespread? Could these events influence the course of the cryptocurrency? From art theft to serial killings: More exciting stories and videos on Russia Beyond's Facebook page.
