In early October, a Greek judge ruled that one of the world’s highest profile financial cybercriminals, the suspected mastermind of a $4 billion bitcoin money laundering ring, should be extradited to the United States to stand trial.
The man wanted was Alexander Vinnik, a Russian citizen believed to be the operator of the digital currency exchange, BTC-e, which handled more than $4 billion in bitcoin. U.S. authorities also believe that Mr. Vinnik is behind the digital currency hack of Mt. Gox, a Japan-based bitcoin exchange, costing the site $500 million. The proceeds of the hack are believed to have then been laundered by Mr. Vinnik through BTC-e.
In July, the U.S. Attorney’s Office in the Northern District of California issued a 21-count indictment against Mr. Vinnik. He is accused of laundering billions of dollars through bitcoin accounts on BTC-e. In addition, he is accused of facilitating crimes including drug trafficking, public corruption, hacking, fraud, identity theft and tax refund fraud.
Law enforcement agencies traced bitcoin payments received by criminals on the dark web. Less than a decade old, bitcoin, the anonymous digital currency, has been largely ungoverned. It is seen as the currency of choice for criminals.
Four years ago, the U.S. Department of Justice began its active shut down of dark web marketplaces and investigation into individuals who used and operated them. In October 2013, the FBI shut down Silk Road, the first and most famous market operating on the dark net. Almost since their inception, the dark web marketplaces have been a platform for buying and selling illegal drugs. The founder of Silk Road, Ross Ulbricht, was convicted on charges of engaging in a continuing criminal enterprise, narcotics trafficking, money laundering, and computer hacking. He was sentenced to life in prison without the possibility of parole.
Upon Silk Road’s shut down, dark web vendors and users relocated to other sites. The two largest successors were AlphaBay and Hansa Market. Law enforcement authorities have now shut down both online black markets and arrested their operators. When the founder and leading operator of AlphaBay, Alexandre Cazes, was arrested, his laptop was open and logged into AlphaBay, allowing the authorities to gain access to all of the website’s hidden servers and financial accounts. This information is likely to lead to future investigations into and indictments of the black market users and vendors.
The once hidden and unregulated dark web is at the forefront of the government’s investigative efforts. As such, we expect to see an uptick in the number of cases brought forth as they relate to illicit activities on the dark web.
We will continue to track the progression of this issue and update you accordingly.
Andy Greenberg, Wired, “Silk Road Creator Ross Ulbricht Loses His Life Sentence Appeal,” May 31, 2017.
Dan Boylan, The Washington Times, “U.S., Russia Fight Over ‘Brain’ of Bitcoin Crime Suspect Alexander Vinnik,” Oct. 8, 2017.
Joseph Young, Deep Dot Web, “How Did BTC-e (Allegedly) Process 95% of Bitcoin Ransom Payments,” Aug. 15, 2017.
Nathaniel Popper and Rebecca R. Ruiz, The New York Times, “2 Leading Online Black Markets are Shut Down by Authorities,” July 20, 2017.
Press Release, Department of Justice, Russian National and Bitcoin Exchange Charged in 21-Count Indictment for Operating Alleged International Money Laundering Scheme and Allegedly Laundering Funds from Hack of Mt. Gox (July 26, 2017).
Reuters and Rob Price, Business Insider, “US Indicts Alleged Russian Money-Laundering ‘Mastermind’ Behind $4 Billion Bitcoin Exchange,” July 27, 2017.