Posted on 03-03-2020.
The crypto-exchange BTC-e was operational between 2011 and 2017 but its history is still being made. The platform was involved in a major international money laundering scheme, but there’s much more to its story: hackers, insurgents, threats, and a whole load of Bitcoin.Recently, ForkLog received an exclusive commentary regarding BTC-e exchange, its partnering companies, and money laundering through a large Russian bank. In this article, we tell the sad story of BTC-e exchange and share the latest findings on the tangled mess of shell companies, litigations, and almost ceaseless finger-pointing.
“The Mt. Gox accounts [Vinnik] used could be linked to his online identity "WME." As WME, Vinnik had previously made a public outcry that coins had been confiscated from him (the coins in question coming from Bitcoinica),” reads the report.In July 2017, the BTC-e website was blocked and the operating company fined $110 million civil money penalty for violating AML laws. The respective announcement by The Financial Crimes Enforcement Network also mentioned Russian national Alexander Vinnik as “one of the operators of BTC-e.” Vinnik himself was arrested on July 25, 2017, in Greece. He was in the middle of a family vacation in a fancy hotel. FinCEN assessed a $12 million penalty against him for his role in the violations. The U.S., Russia, and France wanted to see Alexander Vinnik in their courts. By now, France has the lead. Among other things, Vinnik is accused of “defraud[ing] over 100 people in six French cities between 2016 and 2018.” After the $110 million fine and btc-e.com shutdown that took place back in 2017, all the fiat funds belonging to BTC-e were frozen and the authorities seized 36% of users’ funds. This meant that people weren’t able to withdraw their money. The exchange quickly reemerged with the new website btc-e.nz, promising to start paying out users their money without KYC after moving to a new platform on September 15th, 2017. As promised, the platform, now headed by Dmitri Vasilev, reopened on WEX.nz. https://twitter.com/btcecom/status/908785405117550594 Users’ accounts were restored and everybody had some bonus tokens eligible for trading. The company claimed it had an agreement with a list of verified exchange services that would facilitate withdrawals of dollars, euros, and rubles worldwide. Unfortunately for WEX’s users, on September 28th, 2017, the platform introduced account verification. The procedure was said to be optional, but it was mandatory for anybody who wanted to withdraw or deposit fiat, as well as for those whose money was lost with old BTC-e. After a year, in April 2018, WEX had paid out about 20% of the $700 million estimated debt and was going to buy back users’ tokens. On July 12th, the platform closed withdrawals due to alleged system maintenance. https://twitter.com/WEXnz/status/1016330620308508672 Later, on July 21st, the platform was sold to Dmitry Khavchenko, who is tied to Donetsk People's Republic, an unrecognized state formed in the Donetsk Oblast of Ukraine. New owners believed the platform will be instrumental in moving money across the borders of the unrecognized state. Dmitri Vasiliev, ex-CEO of the platform, said that he didn’t get any money from selling WEX but given the state of the business he would rather pay extra to get rid of it. He also noted that the new owners were the ones who initiated the deal, aggressively suggesting that he should sign the papers. At that time the total trading volume on WEX amounted to $3 million. In August 2018, the platform turned out to be bankrupt and has been defunct ever since. Former customers estimated that total losses exceeded $400 million. Dmitri Vasiliev was arrested in Italy in July 2019. The actual details are unclear, but the arrest of WEX’s ex-CEO isn’t much of a surprise.
“In this history, we’ve discovered that BTC-e exchange became Okpay’s client in late summer 2011. It was represented by Dmitry Svetleishiy who opened a personal account there. This account received money from Trade Hill exchange. Subsequently, the funds have been used to buy hosting and BTC-e domain,” Mayzus told ForkLog.After a while, a user with the same IP-address opened an account for Eurostyle Advisor, Alexander Vinnik’s company that facilitated transactions for BTC-e clients. According to Sergey Mayzus, Eurostyle Advisor was also transacting with 15 offshore Cyprus-based companies involved with the case of money laundering via BTC-e.
“Vinnik provided the identifying documents and showed that he is indeed the person in control of BTC-e crypto-exchange, that he isn’t a nominee, and that an account was opened for him,” Mayzus said.Considering the FBI saying that money laundering can happen via crypto-exchanges, MFS filed a Suspicious Activity Report concerning BTC-e. The report included individuals affiliated with the exchange and its ultimate beneficiary. MFS was also willing to provide information on all transactions for the accounts in question.
“There wasn’t a subsequent report about the exchange itself, but rather about particular transactions, as [MFS] suggested that the clients who conduct illegal operations are the greatest danger. We’ve been responding to inquiries from various law enforcement agencies, including those in the U.S. Everybody knew that BTC-e is controlled by Alexander Vinnik,” Mayzus said
“Vinnik opened accounts for Always Efficient, Canton Business Corporation, Gem Invest, Eurostyle Advisor, and Voix Impex. Gem Invest was accepting cryptocurrency payments meant for xBTCe crypto-exchange, which was also controlled by Vinnik and his tea. He had already warned the MFS’s compliance about this exchange back in 2015,” Mayzus said.According to his information, xBTCe belongs to Alexander Klimenko, the owner of FXOpen. The head and director of FXOpen is Denis Peganov, who is also the director of XP Solutions.
“Looking into Peganov’s persona, I figured out that he plays poker and took part in several poker championships. From people in the poker community I’ve learned that in April 2017, Peganov was visiting Monaco for the PokerStars tournament. He was staying in the same hotel room with a guy called Alexey, a BTC-e administrator. The last name of this Alexey puzzled me for a while. Later, after noticing the BTC-e administrator’s name on BBC Russia, I’ve googled ‘Bilychenko Poker’ and ‘Peganov Poker,’ and the pieces came together. "Moreover, poker also connects these two with Dmitry Vasiliev (ex-CEO of WEX exchange) and a notorious hacker [Dmitry Olegovich] Zubakha,” Mayzus told ForkLog.Given the information, Sergey Mayzus described a possible money laundering scheme involving BTC-e.
“Via Mayzus Financial Services, Vinnik was receiving payments from BTC-e’s clean clients to Always Efficient’s account. Then he would use the account to make payments to clients. At the end of each day, he transferred whatever money left to Canton Business Corporation’s account with MoneyPolo. After that, the money went to XP Solutions’ account with Alpha Bank in Moscow, then to FXOpen’s accounts.”According to Mayzus, the money didn’t get back from this account, except for one case in early 2014, when Mt.Gox went bankrupt.
“This asks for a deeper investigation. What happened to the money after getting to FXOpen is a question for the regulator,” he noted.
The invoice for $1.565 million to be paid to XP Solutions by Canton Business Group. Screenshot by Sergey MayzusMayzus said that over the first half of 2017 alone, XP Solutions’ accounts received upwards of €30 million. According to him, Klimenko initially confirmed that there’s over €40 million on FXOpen’s account. They would open short positions for some currency pair for the entire deposit. Most likely, Klimenko, who had the money, would open overlapping positions in some offshore company.
“On the backdrop of the international scandal, our personal and corporate accounts started closing. Moreover, since August, my family and I have received threats of physical violence. I contacted Cyprus police and am now under the witness protection program. On October 26th, I filed a lawsuit against 16 companies and Alexander Vinnik seeking €200 million in damages,” Mayzus said.By November 13th, Vinnik has already entered proceedings as a defendant. Interestingly, by that time, only a single Cyprus-based company Edelvace Limited has been informed.
“At the same time, I was contacted by a Russia Today correspondent, who asked me about the lawsuit. I haven’t told anybody about the lawsuit. It isn’t hard to conjecture who told the media about the case. Using Facebook, I found the phone number of Timofey Musatov. He confirmed that he had information about the lawsuit and invited me to Greece as a witness in Vinnik’s case. There he demanded that I deny any relation between Vinnik and BTC-e in court. I told him that I don’t want to be an accomplice since MFS had already filed several reports about Vinnik’s company and the FBI had taken the relevant documents from us. Musatov then threatened to make me a criminal and have my property arrested. He also said that I won’t get anything from Vinnik since he doesn’t have anything.”Subsequently, Mayzus had excluded Alexander Vinnik’s name from the lawsuit against the Cyprus companies.
“The court would have required us to disclose SAR documents involving Vinnik’s partners and their transactions. Musatov and his accomplices could get to these documents. According to English laws, this would be considered “tipping off,” which is giving somebody a tip about an investigation against them. I couldn’t let this happen, so my lawyer and I revoked the lawsuit against Vinnik. The further proceedings would go on in a closed manner, inaccessible to Musatov. The judge reviewed the documents we’ve provided and ruled that the companies in question were involved in illegal activities and have to pay out the damages.”Recently, Sergey Musatov got access to a written conversation from 2017 between Timofey Musatov and Vinnik’s Greek lawyer Ilias Spirliadis. In the conversation, Musatov offers to fabricate a criminal case against Mayzus in Greece. ForkLog reviewed excerpts from the correspondence. According to Mayzus, the conversation took place before he met Musatov in person.
“The reason behind this attempt is that Musatov knew that I could be a threat to his client Vinnik. I could’ve acted as a witness, as Vinnik was a client of the company I own,” Mayzus suggested.He also speculated that Igor Ashmanov, a Russian businessman, may be involved with the fake criminal case. According to a conversation on roem.ru, Ashmanov called Mayzus out for “snitching on Vinnik to the FBI” and “cashing out and stealing Bitcoin.”
Notably, Sergey Mayzus became the MFS director and got access to the user base on December 22d, 2017. Before that, he was one of the shareholders in the company
“I see one right in front of me. Wasn’t that you snitching on Vinnik to the FBI? Come on, sue me and prove that you aren’t a snitch. That you weren’t cashing out and stealing Bitcoin. And I will explain how this is my value judgment. A couple of years of entertainment for you and a job for the lawyers.”
“Then why are Mayzus Financial (or whatever it’s called) and its clones in Vinnik’s case called a criminal organization that laundered and/or stole $80 million from the exchange? Hadn’t you personally confirmed in the court that these are your companies?
The money didn’t stay in these companies? It wasn’t other people’s? It wasn’t theft? You did even offer Musatov to unlock and hide the money to share it later. You were trying to talk BTC-e investors into giving you this money in Riga, weren’t you?
I heard all this from Timofey a while ago. I can’t recall it perfectly but it still looks bad.
All in all, you and your buddies are toxic. I wonder how you, an outsourced FBI agent who hides $100 million, can freely go to Russia.
So, you need anything from me?
Why do you send me stale links about me? I’ve read and discussed those months ago.
But why? I would understand it, if needed insults from me, so you can sue for defamation. But what, you are going to notarize roem screenshots?
The conversation is over.
Screenshots and translation of the conversation on roem.ru
Appointment of Director. Screenshot by Sergey Mayzus
“Given the new information, I’m sure that the criminal case fabrication and the rest of it were organized by Musatov and Ashmanov to get rid of me as the main witness of the prosecution,” Mayzus said.ForkLog asked Igor Ashmanov to comment on his statements about Mayzus.
“I don’t want to discuss it. Mayzus knows the real situation, so do I. I see no reason to publicly discuss something aside from what is already said,” Ashmanov told ForkLog.