Who Is Alexander Vinnik and Did He Play a Role in the Mt.Gox Saga? | CoinCodex

Key highlights:

• Alexander Vinnik is a Russian national that has been accused of laundering over $4 billion USD
• Vinnik was allegedly the operator of the BTC-e cryptocurrency exchange
• Vinnik is currently awaiting trial in France, but is also facing extradition to the United States and Russia

Alexander Vinnik is a Russian national who is suspected of having used his position at Russia-based cryptocurrency exchange BTC-E to help run a digital currency laundering operation for cybercriminals. Allegedly, over $4 billion USD were laundered through the operation starting from 2011. 

However, there is also evidence that suggests Vinnik could have played a role in the infamous Mt. Gox hack in which 850,000 BTC, worth $473 million at the time and amounted to 7% of all in circulation, were stolen.

After spending 3 years in detention in Greece, Vinnik was extradited to France in February 2020 where he is being charged with multiple counts of money laundering, extortion and conspiracy. He is claiming innocence.

How strong is the case against Alexander Vinnik?

The case against Vinnik appears strong, especially because multiple investigations from different countries are reaching the same conclusions.

WizSec’s independent investigation of the Mt. Gox hack

According to Bitcoin security specialists who are conducting an unofficial independent investigation under the name WizSec, Vinnik is the chief suspect for involvement in the Mt. Gox theft. WizSec’s efforts were spearheaded by Tokyo-based software engineer Kim Nielssen, who was one of the victims of the Mt.Gox attack and took it upon himself to recover his stolen funds.

By analyzing the transaction history and flow of stolen coins, they have found out how all of the stolen coins were being transferred through the same wallets. At WizSec, they have put together an interactive flowchart that shows stolen coins and their transaction history, which you can see in the static form in the picture below.

One of the Mt. Gox accounts involved in the large scale laundering of stolen funds was linked to Vinnik’s online identity “WME”, which Vinnik himself made public on the Bitcointalk forum post years ago when trying to prove how he was scammed out of $100,000 USD worth of BTC.

The FBI investigation into BTC-E and Alexander Vinnik’s connection to the Russian cryptocurrency exchange

As a part of the federal investigation into the Russain cryptocurrency exchange BTC-E, FBI agents also identified the “WME” moniker, which controlled crucial Mt. Gox accounts with stolen coins and with direct links to BTC-E. According to an article from the Wall Street Journal, one private-sector blockchain investigator estimates BTC-E appeared in 60% to 70% of all criminal cryptocurrency cases through 2016.

The FBI traced blockchain transactions and subpoenaed bank records of banks in Cyprus and Latvia. All the evidence pointed to a Russian citizen by the name of Alexander Vinnik being a prime suspect for a large scale money laundering operation. By late 2016, a federal indictment was filed accusing Vinnik and unnamed accomplices of laundering billions via BTC-E. Shortly thereafter, Vinnik was apprehended while taking a family vacation in Greece.

At the same time, Vinnik was also being investigated by the French authorities. Since the charges originating from the EU had taken precedence over the US extradition request, Vinnik was transferred to France in February 2020, where he is currently awaiting trial.

Prolonged legal battle over extradition

The battle over Vinnik’s extradition is a diplomatic ordeal between the US, France and Russia. The US authorities are trying to put Vinnik on trial for his alleged involvement in financing the Russain hacker groups who influenced the 2016 presidential election, allegedly as a part of the famous Mueller investigation. In France, he was charged with extortion, aggravated money laundering, conspiracy and harming of automatic data-processing systems.

Russia, on the other hand, seems as if it is only trying to protect one of its citizens as the basis for its extradition request was merely a €9,500 fraud case. Vinnik allegedly wrote an admission of guilt to Russian authorities, vowing to testify in his native country.

In February, Vinnik was hospitalized due to deteriorating health conditions as a result of his hunger strike. He is protesting human rights violations he has allegedly suffered during his two-year detention in Greece.

One of Vinnik’s attorneys, Zoi Konstantopoulou, said that after he is tried in France, he would likely be tried in the United States next, that Vinnik was innocent, and that he is being “persecuted” because he’s a blockchain genius and is seen as a threat to the international banking system. She added:

“The handling of the case of Alexander Vinnik by the court is a disgrace. It shows that there is no independent justice in Greece. It shows that the justice system and the Supreme Court is absolutely dependent on the wills of the Greek government, of the US government and of the French government.”

A scammer scammed?

One of the crucial pieces of evidence against Vinnik is his online identity “WME” and its links to the wallet addresses that were full of coins stolen from the Mt. Gox and other hacks. Under the moniker, he made a public outcry on the Bitcoinalk forum in 2012, detailing how the CryptoXchange team had confiscated $100,000 USD from him. In the post, he revealed his email address, surname, and other personal information. The coins that he had claimed were confiscated from him, were previously stolen from Bitcoinica in March 2012.

Ironically, had he never made the post, it would probably be much harder for investigators to put the whole case together. 

Final thoughts on Vinnik’s case and repercussions for the public perception of cryptocurrencies

If no further evidence that would fundamentally change the properties of the case emerges, it seems that Vinnik is facing serious jail time. Even if he doesn’t get convicted in France, it is unlikely that he would be found innocent in the US as well.

On another note, it also seems that “crypto” criminals are often facing disproportionately harsh judgments compared to “traditional” financial fraudsters. No matter what your thoughts are on Vinnik, we can all agree that being held in detention for two years and being denied from having contact with members of his family for all this time is wrong.

The harsh persecution of crypto criminals plays right into the narrative that digital currencies are just some scheme used mostly for illegal activities, and the treatment of Vinnik only further underlines this point.