BTC-e, one of the oldest digital currency exchanges, remained offline on Thursday, July 27, 2017 after law enforcement officials alleged criminal acts by its owner, Alexander Vinnik. On Wednesday, the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) announced a $110 million fine against BTC-e for facilitating crimes such as identity theft, ransomware fraud and public corruption, among other crimes, through its digital network. An additional $12 million fine was imposed against Russian-born Vinnik. Vinnik was arrested in Greece on Tuesday and the indictment was unsealed in California on Wednesday.
BTC-e was used by criminals who stole or extorted Bitcoin from the victims and converted the into traditional currency using U.S. dollar and Russian ruble-based bank accounts registered to shell companies. The exchange is accused of laundering more than $4 billion for criminals. Vinnik's arrest followed the arrests in Europe and the U.S. of two large drug markets that used Bitcoin as their primary currency.
The indictment also revealed that hundreds of thousands of Bitcoins moved from Tokyo-based Bitcoin exchange Mt. Gox that were controlled by Mr. Vinnik. MT. Gox declared bankruptcy in 2014 after being hacked and losing more than 800,000 Bitcoins, some of which were laer recovered. 300,000 of the missing Bitcoins were moved from Mt. Gox to a different Bitcoin exchange and converted to traditional currencies that were deposited into Mr. Vinnik's bank accounts. According to the New York Times, these Bitcoins would be worth approximately $800 million today.
The agencies also allege that BTC-e ignored he ‘know your customer' (YC) laws in order to serve a criminal customer base.
The arrest and fines imposed this week should serve as a reminder that even though the digital currency market continues to heat up, sometimes that heat is a hint towards an underlying explosion – as with all trading, make sure to understand your risks before getting started and to use a recommended broker for all Bitcoin trading.