New details on Mt. Gox money whereabouts in BTC-e exchange case.

New court documents that have been released reveal new information regarding the theft of a massive amount of bitcoin from Mt. Gox, which was spectacularly hacked in 2011.

The two indictments that have been unsealed offer an uncommon glimpse into the investigations of Mt. Gox and BTC-e, two of the oldest bitcoin companies.

According to one of the indictments, Mt. Gox was hacked shortly after the exchange was founded in 2010 by two Russian nationals, Alexander Verner and Alexey Bilyuchenko, along with other unidentified co-conspirators. Mt. Gox declared bankruptcy in 2014 after most of its cryptocurrency was lost.

During the years between 2011 and 2014, Verner, Bilyuchenko, and the unnamed co-conspirators transferred at least 647,000 bitcoin from Mt. Gox wallets. Of these coins, 300,000 were sent to BTC-e, another now-defunct crypto exchange that was shut down by the FBI in 2017. The alleged operator of BTC-e, Russian national Alexander Vinnik, was arrested. Bilyuchenko was reportedly the administrator of BTC-e and was arrested in Russia in 2019, but the current whereabouts of Bilyuchenko and Verner are unknown.

The stolen bitcoin was transferred to BTC-e, as well as to TradeHill (another early bitcoin exchange that was shut down in 2013) and to Verner and Bilyuchenko’s own accounts at Mt. Gox. To liquidate the stolen cryptocurrency, Verner and Bilyuchenko used U.S. companies, although the indictment does not name the specific firms involved.

One of the U.S. companies used was BitInstant, a crypto exchange founded by Charlie Shrem, who was sentenced to two years in prison in 2014 for money laundering. Another company used was Memory Dealers, a bitcoin-friendly computer hardware vendor run by Roger Ver, the founder of the Bitcoin Cash cryptocurrency.

Verner and Bilyuchenko received $2.5 million from BitInstant and Memory Dealers between April and November 2013 to a bank account of BTC-e’s shell company, the Seychelles-registered Canton Business Corporation, according to the Department of Homeland Security. The wire payments from BitInstant and Memory Dealers were labeled as an “Internet Advertisement Agreement,” but BTC-e did not provide any advertising services to BitInstant or Memory Dealers.

The investigators found that BTC-e operators would also send money from their bitcoin sales through multiple PayPal accounts to conceal their origins. The unsealed indictment also clears the names of several people who were previously considered by investigators as Vinnik’s co-conspirators in running BTC-e.

According to the previous version of Vinnik’s indictment filed under seal in 2016, the Department of Justice believed that Vinnik had a co-founder named Andrey Nikonorov, as well as co-owners of the BTC-e shell company, Seychelles-registered Canton Business Corporation, Alexander Buyanov, and Stanislav Golovanov. However, the new version of Vinnik’s indictment says that Nikonorov, Buyanov, and Golovanov did not participate in the criminal activities related to BTC-e. Rather, Vinnik used their identities to cover his tracks. BTC-e was an exchange powerhouse back in the day, and a big part of its money came from various crimes. Starting in 2011, the exchange served about 700,000 users and its bitcoin wallet received over 9.4 million BTC before December 2016, the DOJ said. Users included the ransomware gang CryptoWall and Fancy Bear, the hacker group believed to be sponsored by GRU, Russia’s military intelligence agency. Other high profile users were Carl Mark Force and Shaun W. Bridges, the two FBI agents convicted for misappropriation of crypto from the Silk Road investigation. The former agents sent “several hundred thousand dollars in criminal proceeds” each to BTC-e, the unsealed indictment for Vinnik reads. The new documents come to light as Alexander Vinnik is trying to return to his home country, Russia.

Vinnik has been detained outside of his home country for almost five years. He was first taken into custody in August 2017 while on vacation with his family in Greece. He was then sent to France and eventually ended up in the Santa Rita prison in the United States in August 2022.

He is accused of operating an unlicensed money services business, conspiring to commit money laundering, money laundering, and engaging in unlawful monetary transactions. If found guilty, Vinnik could be sentenced to up to 55 years in prison.