Russian citizen Alexander Vinnik has been found guilty of money laundering through the BTC-e cryptocurrency exchange and now faces extradition to the United States. Photo / Getty Images
Russian citizen Alexander Vinnik has been found guilty of money laundering through the BTC-e cryptocurrency exchange and now faces extradition to the United States. Photo / Getty Images
Arrested while on holiday in Greece in 2017, Russian national Alexander Vinnik fought extradition to the United States and France for three years. Those appeals were dismissed and the 41-year-old stood trial in France where he was convicted of money laundering through a Bitcoin cryptocurrency exchange. His legal woes are far from over, however. The US still want to extradite him on serious criminal charges, while $140 million sits frozen in New Zealand bank accounts. Jared Savage reports.
A Russian "computer genius" with $140 million in frozen bank funds in New Zealand has been convicted of money laundering in France.
Alexander Vinnik was arrested while on holiday in Greece in 2017 and extradited to France this year, where he stood trial on laundering millions of Euros for cybercriminals and extortion from cyber hacking attacks.
Prosecutors alleged the 41-year-old was the creator of the infamous Locky ransomware; where emails masquerading as invoices, once opened, activated malware that shut down the user's computer.
A message would appear on the hacked computer with instructions to pay a ransom in Bitcoin cryptocurrency to regain control of the machine.
Vinnik was accused of making €135 million from the scam. While the French court acquitted Vinnik of being the mastermind behind the Locky attacks, according to overseas media reports, he was found guilty of laundering the money extorted from the ransomware hacks.
The laundering was conducted through BTC-e, one of the world's largest and most widely used cryptocurrency exchanges.
Described by his legal team as a "computer genius" persecuted because he posed a threat to the international banking system, Vinnik says he was an employee of BTC-e and not the one in charge.
But his convictions in France will increase the chances of the $140m of funds restrained by New Zealand police investigators, as revealed by the Herald in June, being forfeited as the proceeds of crime.
Vinnik was sentenced to five years in prison in France, and now faces the possibility of being extradited to the United States on further charges connected to BTC-e, where at least $4 billion dollars' worth of Bitcoin was traded with "high levels of anonymity".
While the exchange of Bitcoin is entirely legitimate, prosecutors from the US Department of Justice allege Vinnik created a customer base for BTC-e that was "heavily reliant on criminals" by not requiring users to validate their identity, obscure and anonymise transactions and the source of funds, and lacked any anti-money-laundering processes.
As such, the extradition order alleges Vinnik was in charge of BTC-e which received the criminal proceeds of computer hacks by cyber criminals, ransomware scams, identity theft schemes, corrupt public officials, tax fraud and drug rings.
Alexander Vinnik, centre, escorted by Greek police following his arrest while on holiday in 2017. Photo: Getty Images
According to the unsealed US indictment, BTC-e had a base of operations in the Seychelles Islands and its web domains are registered to shell companies in, among other places, Singapore, the British Virgin Islands, and New Zealand.
Companies Office records show Vinnik registered a business, WME Capital Management Ltd, to a North Shore address in 2008. It was removed from the register in 2012, as the Companies Office thought it ceased operating.
The initials "WME" also appear in the US indictment, as Vinnik allegedly operated the "WME" account at BTC-e.
Web domains for the Bitcoin exchange were registered to several other companies registered in New Zealand, which have been co-operating with the police Asset Recovery Unit to recover alleged criminal proceeds linked to Vinnik.
Around $140m in offshore bank accounts controlled by a New Zealand registered company have been clawed back to New Zealand, where the funds have been restrained under the Criminal Proceeds (Recovery) Act.
"New Zealand Police has worked closely with the Internal Revenue Service of the United States to address this very serious offending," Police Commissioner Andy Coster said in June.
"These funds are likely to reflect the profit gained from the victimisation of thousands, if not hundreds of thousands, of people globally as a result of cyber-crime and organised crime."
Coster said given the global nature of money laundering there was always a risk that New Zealand companies will inadvertently become involved.
"However, this restraint demonstrates that New Zealand is not, and will not be, a safe haven for the illicit proceeds generated from crime in other parts of the world.
"The global criminal community needs to understand New Zealand's financial system, and companies established here, are not the places to try to hide illicit income.
"This restraining order also demonstrates that New Zealand Police are actively conducting investigations with our international partners and that we have the expertise to investigate money laundering at the most serious level."
Russian citizen Alexander Vinnik has been found guilty of money laundering through the BTC-e cryptocurrency exchange and now faces extradition to the United States. Photo / Getty Images
The $140m in restrained bank funds is by far the largest case taken under the Criminal Proceeds (Recovery) Act, nearly double the $70m frozen in bank accounts linked to a wealthy Chinese-Canadian mogul.
Cases taken under the law are determined by the civil level of proof, the "balance of probabilities", rather than the much higher criminal evidential threshold of "beyond reasonable doubt".
To grant the restraining order, a High Court judge must be convinced there are "reasonable grounds" someone has profited from "significant criminal activity".
Whether the seized assets are ultimately forfeited to the Crown will be determined by a High Court judge, either by way of a trial or a potential settlement agreement.
The New Zealand police case will rely on the evidence gathered by the United States, including the allegation Vinnik received funds from the notorious hack, or computer intrusion, of Mt Gox.
An early digital currency exchange, the Japanese-based Mt Gox eventually collapsed, in part, due to the losses from the hacking where several hundred million US dollars' worth of bitcoin was stolen.
More than half of the stolen bitcoin was sent to three separate, but linked, BTC-e accounts, including one allegedly controlled by Vinnik.
The proceedings against Vinnik is the latest example of the police testing their powers under the Criminal Proceeds (Recovery) Act, which came into force in 2009.
In the past, the law has most often been used to seize wealth accumulated by gangs and drug dealers but has pushed into new territory in recent years.
