Crypto Fraudster Sentenced 5 Years for Money Laundering

Prosecutors allege Vinnik used the exchange BTC-e to launder stolen funds

The alleged former operator of a cryptocurrency exchange was sentenced to five years in prison on money laundering charges by a French court on Monday. Alexander Vinnik, who prosecutors say operated the now-shuttered BTC-e exchange, was also fined $121,000 related to the charges against him.

Originally from Russia, Vinnik was arrested at a Greek resort in December 2017 and extradited to France at the beginning of this year. After he was arrested, Vinnik faced as much as 55 years in prison because prosecutors slapped him with wide-ranging charges from identity theft to drug trafficking and money laundering.

Key Takeaways

  • Alexander Vinnik, who worked with crypto exchange BTC-e, was convicted of money laundering by a French court and sentenced to five years in prison and fined $121,000.
  • Vinnik is also alleged to be the brains behind Locky, a malware that crashed computers and asked for Bitcoin as ransom.
  • Vinnik was wanted in three countries – France, Russia, and the United States – on wide-ranging charges.

In addition to France, he was wanted in Russia and the United States. Vinnik was charged with fraud to the tune of 9,500 euros in his home country. Meanwhile, the Department of Justice unveiled a list of 21 charges in 2017, alleging that BTC-e was a clearinghouse for funds that were sourced from "computer intrusions and hacking incidents, ransomware scams, identity theft schemes, corrupt public officials, and narcotics distribution rings."

Eventually, however, the ransomware charges against Vinnik were dropped, and he was convicted only of money laundering by French courts. He still has to face authorities in Russia and the United States and has denied the charges, claiming that he was an "ordinary freelance operator" for the BTC-e exchange.

Money Laundering Through Malware

In the case against Vinnik, prosecutors claimed that he was the brains behind Locky, a malware that was sent to unsuspecting users as an invoice attachment that crashed computers after it was opened. Users were asked to deposit Bitcoin to gain access back to their computers. According to French authorities, Vinnik collected $164 million from the attacks over a two-year period from 188 businesses and individuals in the country.

Subsequently, he is supposed to have laundered the money through BTC-e, an exchange that advertised itself as an anonymous way to trade Bitcoin without "even the most basic identifying information." Earlier this year, authorities in New Zealand froze $140 million in bank funds that were linked to Vinnik.

The exchange was also supposed to have received funds from hackers involved in the Mt. Gox crash. "A significant portion of BTC-e's business was derived from suspected criminal activity," stated a court indictment filed by prosecutors in the Northern District of California court suing BTC-e for $100 million last year.

After Vinnik's 2017 arrest, he attempted to get himself extradited to Russia because he faced a paltry fraud charge there. But his bid was unsuccessful. His lawyer told AFP that they will "probably" appeal the sentencing.

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