US DOJ Charges Two Russians With Mt. Gox Hack
Two Russian nationals have been charged by the US Department of Justice (DOJ) for their involvement in hacking of the Japanese cryptocurrency exchange Mt. Gox, and in causing the collapse of the infamous exchange.
Culpable for collapse
The indictment, which has been unsealed, was originally filed on June 7, and identifies the individuals as Alexey Bilyuchenko, 43, and Aleksandr Verner, 29. They are accused of not only hacking the exchange but also conspiring to launder approximately 647,000 bitcoins, which is valued at around $17.1 billion based on Bitcoin’s unit price on Friday.
Additionally, Bilyuchenko has been charged with collaborating with Alexander Vinnik to operate the illicit exchange known as BTC-e between 2011 and 2017. BTC-e was shut down by U.S. law enforcement in 2017, and Vinnik was later extradited from Greece to the U.S. in 2022 on charges of running BTC-e and engaging in money laundering.
Mt. Gox, which experienced a major theft, declared bankruptcy and closed its operations in 2014. Bilyuchenko and Verner played a significant role in the theft, leading to the exchange’s insolvency, according to Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. The indictment states that “in or about September 2011, [the defendants] and their co-conspirators gained and caused others to gain unauthorized access to the Mt. Gox server in Japan.”
BTC-e exchange money laundering
Furthermore, it is alleged that Bilyuchenko utilized his ill-gotten gains from the Mt. Gox theft to establish the BTC-e exchange, which facilitated global money laundering activities for criminals. US Attorney Ismail J. Ramsey for the Northern District of California stated that Bilyuchenko and his co-conspirators operated a digital currency exchange that enabled criminal entities, including hackers, ransomware actors, narcotics rings, and corrupt officials, to launder billions of dollars.
In March, there were reports from CoinDesk about movements of BTC-e funds on the blockchain. An exchange wallet linked to BTC-e made its first transaction since 2017, transferring approximately 3,299 bitcoins to a crypto wallet in November 2022. Additionally, six years ago, the exchange wallet sent around 10,000 bitcoins to two unidentified recipients. However, the recent DOJ filing does not specify whether these recipients were Bilyuchenko and Verner.
Slow process
Meanwhile, the long-suffering creditors of the hacked exchange are only beginning to reach the final stages of the bankruptcy process. Japan’s bankruptcy process is incredibly slow and it’s taken the best part of ten years for it to reach the distribution phase. It became apparent in April that the bankruptcy estate was moving to distribute $4.5 billion in cash and digital assets to creditors. It’s understood that the process will be completed in October.
While creditors are taking a haircut in bitcoin terms, on a US dollar basis, they are not fairing out badly given that the leading cryptocurrency has seen massive dollar price appreciation in the intervening years.
