The United States Department of Justice (DOJ) has announced the unsealing of charges related to the 2011 hack of the crypto exchange Mt. Gox and the operation of the illicit cryptocurrency exchange BTC-e. 

The charges were brought against two Russian nationals, Alexey Bilyuchenko and Aleksandr Verner who are accused of conspiring to launder approximately 647,000 Bitcoin (BTC) from their hack of Mt. Gox. According to court documents, Bilyuchenko is also charged with conspiring with Alexander Vinnik to operate BTC-e from 2011 to 2017.

The indictment alleges that Bilyuchenko and Verner stole a massive amount of cryptocurrency from Mt. Gox, leading to the exchange’s ultimate insolvency. Bilyuchenko allegedly used the ill-gotten gains to help set up the notorious BTC-e virtual currency exchange, which laundered funds for cybercriminals worldwide.

According to the indictment, Bilyuchenko, Verner, and their co-conspirators gained unauthorized access to the server holding the cryptocurrency wallets for Mt. Gox, which at the time was the largest Bitcoin exchange in existence, servicing thousands of users worldwide.

Using their unauthorized access, the defendants allegedly fraudulently transferred Bitcoin from Mt. Gox’s wallets to Bitcoin addresses controlled by themselves and their co-conspirators. From September 2011 through at least May 2014, they allegedly caused the theft of at least approximately 647,000 BTC from Mt. Gox, representing the vast majority of the Bitcoin belonging to Mt. Gox’s customers.

To launder the stolen BTC, the defendants allegedly used Bitcoin addresses associated with accounts they controlled at two other online Bitcoin exchanges. They also negotiated a fraudulent contract to provide advertising services to a Bitcoin brokerage service based in the Southern District of New York (the “New York Bitcoin Broker”). 

Under the guise of the Advertising Contract, the defendants allegedly made regular requests for wire transfers into various offshore bank accounts controlled by themselves and their co-conspirators. In exchange for the wire transfers, the New York Bitcoin Broker allegedly received “credit” on Exchange-1, through which the defendants allegedly laundered more than 300,000 of the stolen BTC.

Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division called the announcement an important milestone in two major cryptocurrency investigations. He further stated that the indictments demonstrate the department’s commitment to bringing to justice those who abuse the financial system and participate in illicit activities in the cryptocurrency ecosystem.

Furthermore, U.S. Attorney Damian Williams for the Southern District of New York emphasized that the charges unsealed demonstrate the Justice Department’s ability to tenaciously pursue these alleged criminals, no matter how complex their schemes, until they are brought to justice. 

Featured image from iStock, chart from TradingView.com 

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