23 Jun 2020
Police have frozen $140 million in bank funds linked to a Russian “computer genius” in the largest ever restraint of funds in New Zealand police history.
The money was controlled by a New Zealand registered company and has been frozen as part of a global investigation into a Bitcoin exchange run by Alexander Vinnik who is alleged to have laundered billions of dollars for criminal syndicates.
In a statement, Police Commissioner Andrew Coster said Vinnik previously operated cryptocurrency exchange BTC-e.
Coster alleged that BTC-e, which operated from the United States, had no anti-money laundering controls and policies.
This resulted in criminals and cyber criminals laundering proceeds derived from a range of criminal activities including computer hacking, ransomware attacks, theft, fraud, corruption and drug crime through BTC-e.
Vinnik was arrested on money laundering allegations in Greece in 2017 and has since been extradited to France where he remains in custody.
“New Zealand Police has worked closely with the Internal Revenue Service of the United States to address this very serious offending,” Coster said.
“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.”
Vinnik was on a family holiday in Greece in July 2017 when he was arrested by local police, on an extradition warrant from United States authorities accusing him of facilitating money laundering, identity theft, drug trafficking and computer hacking.
The 37-year-old was alleged to have operated BTC-e, one of the world’s largest and most widely used cryptocurrency exchanges, 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.
Described by his Greek 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.
For the past three years, Vinnik has fought the extradition order in Greece but lost his appeal in January this year. He was whisked from his hospital bed, emaciated from a hunger strike, to France and charged with money laundering and extortion offences.
He will likely stand trial in France, then be extradited to the United States to face similar charges, with maximum penalties of up to 55 years in prison.
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 have been clawed back to New Zealand, where the assets have been restrained under the Criminal Proceeds Recovery Act.
By Jared Savage, New Zealand Herald, 22 June 2020
Read more at New Zealand Herald
RiskScreen: Eliminating Financial Crime with Smart Technology
Count this content towards your CPD minutes, by signing up to our CPD WalletFREE CPD Wallet