How the Commonwealth Bank helped a Bitcoin fraud suspect accused of laundering billions
28 Sep 2020

Alexander Vinnik is in a world of trouble.

The 40-year-old Russian is inside a jail cell in France, where prosecutors argue he is responsible for a vast criminal enterprise.

His problems do not end there: US prosecutors want to extradite him to face criminal charges, while New Zealand police have frozen $130 million of his assets.

The Australian Federal Police are on his tail too.

That is because Mr Vinnik allegedly transferred nearly $100 million through Australia with the help of the Commonwealth Bank, to potentially launder the proceeds of crime.

A ‘breeding ground’ for hackers, fraudsters and public corruption

Mr Vinnik allegedly operated one of the world’s most popular digital currency exchange sites.

Known as BTC-e, the site allowed users to exchange real currency for Bitcoin.

And it offered members — who traded under pseudonyms like CocaineCowboys, ISIS and hacker4hire — near-total anonymity.

The company behind the website was registered in Seychelles — a known money-laundering haven — where people set up shell companies, and hide behind them to protect their identities.

American prosecutors argue BTC-e was a breeding ground for hackers, fraudsters, identity-theft scams, public corruption and drug trafficking.

But there’s a further twist.

Remember how the Mueller investigation found Russian operatives were responsible for hacking the Democratic National Committee, which led to internal Clinton campaign emails getting leaked two days before the 2016 election?

Later analysis showed those Russian hackers paid for their operations using BTC-e, the service American prosecutors claim Mr Vinnik controlled.

How the criminal enterprise unravelled

About a month after Donald Trump was elected president, an analyst for the British bank Barclays began looking at the transactions coming in and out of BTC-e.

The analyst was so concerned by what they’d found, the bank sent a Suspicious Activity Report to the US Treasury’s intelligence division.

“BTC-e also has a high volume of dark web and Tor market activity and mixing activity — a service used to mask and hide the ultimate source of Bitcoin to make them harder to trace,” the analyst stated.

“Although otherwise legitimate trading activity does occur through BTC-e, the above intelligence indicated that wire activity with BTC-e should be treated with caution.”

Meanwhile, an FBI investigation into the Bitcoin exchange was gathering pace.

On the morning of July 25, 2017, BTC-e users woke up, turned on their computers, and were met with a stark message.

That same day, Mr Vinnik was apprehended by police in Greece, where he was reportedly on a family holiday.

A three-way tug of war

Prosecutors in France, the United States and Russia filed extradition requests, with each jurisdiction pursuing Mr Vinnik for separate charges.

A 20-page US Justice Department indictment alleged he was laundering on a vast scale, with more than $5 billion moving through the website.

But he ended up in Paris.

Where even the reported personal intervention of Russian President Vladimir Putin has not helped him.

He has withered away on a hunger strike, and according to Russian media, he’s even been the subject of assassination attempts.

Inside jail, Mr Vinnik has maintained his innocence, telling reporters he only “worked for the company and carried out my duties”.

“It’s not right to blame me for that,” he said.

‘They will kill my wife if I will not return their money’

Meanwhile, some of the BTC-e users who had lost access to their money turned on the middleman — a Russian entrepreneur named Sergey Mayzus.

Mr Mayzus owned an electronic payment provider called MoneyPolo that members had used to transfer money in and out of BTC-e.

“People started to threaten me, to threaten my family,” he said.

Mr Mayzus is a controversial figure himself, accused of hosting other internet scam websites, and allowing potentially dirty money through his business.

But he maintains he has always acted in accordance with anti-money laundering laws.

Mr Mayzus said after BTC-e was shut down, the criminals who had been using the services demanded their money back from him.

“They started to publish photos of my property, my addresses, photos of my family members, my children, and say that they will kill my child, they will kill my wife if I will not return their money,” he told the ABC.

How almost $100 million of suspect money moved through Australia

The Barclays’ report was leaked as part of the massive trove of secret US Treasury documents known as FINCEN Files.

Suspicious Activity Reports from other banks were also in the leak, each with their own concerns about Mr Vinnik’s companies.

Those reports, as well as other documents Background Briefing has seen, show Mr Vinnik transferred almost $100 million through Australia between 2013 and 2015.

That money was deposited into an Australian company called FX Open AU Pty Ltd.

Mr Mayzus said Mr Vinnik was possibly money laundering.

By Mario Christodoulou, Geoff Thompson and Benjamin Sveen, ABC News, 26 September 2020

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