The United States Department of Justice (DOJ) on Friday charged two Russians, alleging they were at the forefront of the 640,000 bitcoin launder on crypto exchange Mt. Gox back in 2011. The Russians, Alexey Bilyuchenko, 43, and Aleksandr Verner, 29, were also indicted for illegally operating an exchange, BTC-e.
“This announcement marks an important milestone in two major cryptocurrency investigations. As alleged in the indictments, starting in 2011, Bilyuchenko and Verner stole a massive amount of cryptocurrency from Mt.Gox, contributing to the exchange’s ultimate insolvency,” the DOJ said in a post on its official website.
Mt. Gox was one of the most prominent crypto exchanges before its demise. The Japan-based firm filed for bankruptcy in March 2014, claiming it could no longer continue operations after Bilyuchenko and Verner allegedly defrauded the company.
Two Russians Hacked Mt. Gox’s Server
The indictment alleged that Bilyuchenko and Verner hacked Mt. Gox’s server holding cryptocurrency wallets. Then, the exchange kept its customers’ wallet addresses and their private keys on a server in Japan.
After the hack, the two Russians transferred the funds—up to 647,000 bitcoins—to a wallet they controlled. The funds stolen from Mt. Gox were a majority of its crypto holdings; the exchange eventually shut down as it could not cope with the exploit.
To launder the stolen funds, Bilyuchenko and Verner entered into a Bitcoin advertising contract with New York Bitcoin Broker, a Bitcoin brokerage service provider based in the Southern District of New York.
Using the agreement, the two indicted criminals periodically requested that the brokerage firm helps transfer the stolen funds to offshore bank accounts that they controlled. Bilyunchenko and Verner successfully laundered about 300,000 bitcoins ($6.6 million) through this medium.
Illegal Crypto Exchange
The indictment also stated that Bilyunchenko and Alexander Vinnik allegedly ran a crypto exchange, BTC-e, with the proceeds of the Mt. Gox hack. According to the filing, the exchange operated between 2011 and 2017.
The indictment noted that criminals and fraudsters worldwide used the exchange to launder funds received in an ill manner. The Justice Department, however, said it is working tirelessly to identify and arrest the criminals who used the exchange.
Mt. Gox tried to offset creditors in 2020 after offering to purchase their claims at a discounted $800 per bitcoin price. The exchange recently proposed to repay investors, allowing them to file for repayment until April 6.
