QUADRIGA INITIATIVE
CRYPTO WATCHDOG & FRAUD RECOVERY PLATFORM
A COMMUNITY-BASED, NOT-FOR-PROFIT
$990 000 000+ USD
JULY 2017
RUSSIA
BTC-E
DESCRIPTION OF EVENTS
"BTC-e was a cryptocurrency trading platform founded in July 2011 by Alexander Vinnik and Aleksandr Bilyuchenko". "BTC-e was established in July 2011, handling a few coin pairs, including Bitcoin/U. S. dollar and I0Coin to Bitcoin. By October 2011, they supported many different currency pairs, including Litecoin to dollars, Bitcoin to rubles and RuCoin to rubles." "It was a component of the CoinDesk Bitcoin Price Index since the index's September 2013 formation."
"[A]s of February 2015 handled around 3% of all Bitcoin exchange volume. Until the 25th of July 2017, it allowed trading between the U.S. dollar, Russian ruble and euro currencies, and the Bitcoin, Litecoin, Namecoin, Novacoin, Peercoin, Dash and Ethereum cryptocurrencies."
"BTC-e was operated by ALWAYS EFFICIENT LLP which is registered in London and is listed as having 2 officers (Sandra Gina Esparon and Evaline Sophie Joubert) and two people with significant control: Alexander Buyanov and Andrii Shvets."
"According to internet rumors, 66,000 bitcoins were suspected to have been stolen from the BTC-e exchange. The user inquired on the blockchain that the block with a block height of 477472 was transferred out of 66163.40004136 bitcoins. It is suspected that the BTC-e user was stolen by hackers of a huge amount of bitcoins." "According to Pawel Kuskowski, CEO & Co Founder at Coinfirm, right after the arrest of Alexander Vinnik, broadly referred to as the mastermind behind BTC-e, over 66,000 BTC were moved …across the Bitcoin ecosystem."
In July 2017, “BTC-e was taken down by authorities, following the arrest of 38-year-old Russian national Alexander Vinnik in Greece, for allegedly laundering $4 billion of ill-gotten bitcoins.” "The US government closed the exchange on allegations that it was involved in laundering money for ransomware schemes. In fact, one set of security researchers estimated that BTC-e was used to convert 95% of all ransomware payments into fiat currency."
“A BTC-e admin updated users on Bitcointalk and on Twitter about the exchange’s situation, and revealed that they controlled over 55% of user funds, and that the remaining 45% would be reimbursed through a Bitfinex-like token. The exchange then relaunched as World Exchange Services (WEX) and updated users on its current situation.”
"On July 25, 2017, users began complaining that any attempts to access the site were met with a message from the US Department of Justice stating that the domain had been seized due to a joint US Secret Service/FBI investigation."
"According to a statement by Michael D. Ambrosio, a special agent with the USSS, “BTC-e was noted for its role in numerous ransomware and other cyber-criminal activity; its take-down is a significant accomplishment and should serve as a reminder of our global reach in combating transnational cybercrime.”" "BTC-e denied these allegations and stated that the individual arrested in connection with these crimes, the aforementioned Alexander Vinnik, was not an employee or founder of the now-defunct crypto exchange."
“US authorities seized the BTC-e.com domain name and 38% of all customer funds." "In response to this, those behind BTC-e launched another exchange and rebranded themselves as Wex.nz, promising to repay any customers who had lost funds from the seizure. Wex.nz was a 1:1 copy of the previous BTC-e site and sought to pick up where the old BTC-e platform left off." "To repay its customers BTC-e created WEX tokens, which were used to represent customers' seized equity. The WEX tokens represented $1 and were issued to account for the value of customers cryptocurrencies at the time of the theft.”
"On June 22, 2020, the Asset Recovery Unit in New Zealand announced the freezing of $90 million as part of a global investigation into BTC-e—the now-defunct Bitcoin exchange run by Alexander Vinnik. Police Commissioner Andrew Coster said that the “New Zealand Police has worked closely with the Internal Revenue Service of the United States to address this very serious offending.”"
The BTC-e platform was officially registered in London, however it was widely known to be used for laundering stolen or extorted funds on a regular basis. For example, there is evidence that it was one of the most popular methods for criminals to cash out ransomware payments. Despite this reputation, there were many people who still used the exchange to transact with their legitimate currency. When the US government seized the domain, it was seen as overreaching by many who lost their funds in other countries. Unfortunately, under the US civil asset forfeiture laws, it’s generally guilty until proven innocent, and the bar for proving innocence are extremely high. There have been countless cases where people have been travelling with cash legitimately earned, and had it seized and not returned. The team behind the exchange vowed to continue operating, and ultimately relaunched as WEX.
HOW COULD THIS HAVE BEEN PREVENTED?
BTC-e came about and rose to prominence due to a lack of regulatory clarity and more legitimate options for crypto traders.
Cryptocurrency exchange WEX/BTC-e tied to Bitcoin ransomware hackers (Feb 2)
Criminal Case Against Failed WEX Crypto Exchange Points at Russian Law Enforcement - CoinDesk (Feb 2)
Report: Troubled Crypto Exchange Wex Finds New Owner | Exchanges Bitcoin News (Feb 2)
Criminal Case Against Failed WEX Crypto Exchange Points at Russian Law Enforcement (Feb 2)
100 Crypto Thefts: A Timeline of Hacks, Glitches, Exit Scams, and other Lost Cryptocurrency Incidents (Jan 25)
Bitcoin Scams and Cryptocurrency Hacks List - BitcoinExchangeGuide.com (Mar 5)
BTC-e Users' Funds Stuck in Limbo as Exchange Blames Third Party (Mar 7)
Why the feds took down one of Bitcoin’s largest exchanges - The Verge (Mar 8)
BTC-e Domain Seizure by U.S. Law Enforcement Sparks Jurisdiction Questions | News Bitcoin News (Mar 8)
After FBI Takedown: BTC-e Exchange Says They Still Possess Databases and Wallets | News Bitcoin News (Mar 8)
US Government Seizes Russian Bitcoin Exchange BTC-e Domain (Mar 8)
FBICO? BTC-e Considers Debt Tokens and ICO to Repay Users (Mar 8)
BTC-e Seized by US Government : Bitcoin (Mar 8)
France Rejects Russian Request to Extradite BTC-e Operator Alexander Vinnik – Bitcoin News (May 27)
CipherTrace Cryptocurrency Crime and Anti-Money Laundering Report 2020 (Jun 20)
SlowMist Hacked - SlowMist Zone (Jun 26)
BTC-e - Wikipedia (Dec 12)
https://www.bbc.com/news/world-europe-50821547 (Dec 12)
What Happened To BTC-e.com (and Wex.nz)? – Crypto Asset Recovery (Dec 12)
Binance Freezes Funds on Multiple Accounts with Dubious Crypto Exchange - Bitcoin Magazine: Bitcoin News, Articles, Charts, and Guides (Dec 27)
https://www.ccn.com/trump-doj-sues-bitcoin-exchange/ (Mar 19)
https://www.theblockcrypto.com/linked/69093/new-zealand-police-seize-90-million-from-alleged-btc-e-operator-alexander-vinnik (Apr 10)
Worldwide crypto & NFT rug pulls and scams tracker - Comparitech (Dec 15)
