This post is not about a legendary figure in the cryptocurrency sphere, but actually for an anti-hero instead.
First of all, I wanted to comment that this is a sensitive case that created diplomatic incidents between four different nations. It is not an issue to be taken lightly. The interested parties comprise of USA, France, Russia, and Greece. It is not a light subject as it concerns the life of a person and billions of USD in Bitcoins. With this article, I will try to write everything in detail without any personal comments, but instead, just provide the facts in a proper order.
In a previous post, "The Story of Mt. Gox", I provide in chronological order the events that unfolded during the four years (2010-2014) the legendary exchange Mt.Gox was active, and how it collapsed. The now-defunct exchange was hacked multiple times during its existence, ending up with a loss of 850,000 Bitcoins and filing for bankruptcy in February 2014 in Tokyo, Japan. The case of Alexander Vinnik is indirectly connected with the events that led to the demise of Mt.Gox.
THE ARREST
On July 25, 2017, Russian national Alexander Vinnik was arrested by Greek authorities, after the demand of the United States, while in vacations with his family in northern Greece. He is facing charges of money laundering of over $4 Billion of stolen Bitcoins, most of which were relevant to the various hacks of the Mt.Gox exchange. Alexander Vinnik was the accused person of laundering stolen Bitcoins from various exchange hacks through the exchange BTC-e. He is also accused of being the main administrator of the exchange, although it seems that there is not enough evidence backing this. He was arrested while in vacations in a coastal part of Chalkidiki, Northern Greece, inside the hotel he was staying in and in front of his wife Alexandra and his two children.
According to a Greek webpage Vinnik was approached and arrested by two police officers wearing swim suits, while being observed by US agents, which have advised the greek officers beforehand to try and grab Vinnik's mobile phone before he manages to turn it off.
Vinnik arrested in Greece (July 2017)
He is facing the following charges and maximum jail time:
Source: US Department of Justice
The arrest was major news for every mainstream media and there are many publications and extensive coverage of the events that unfolded. Occasionally we watch reports and read news about Vinnik's case and his awaited extradition to the US where he will be judged for the above accusations. Vinnik is accused by the indictment having obtained funds in the form of Bitcoin, that were acquired by hackers after successfully infiltrating the Mt.Gox platform and administrative accounts and was laundering these funds systematically through BTC-e and another exchange called "Tradehill" which was based on US soil (San Francisco).
Through his actions, it is alleged that he stole identities, facilitated drug trafficking, and helped to launder criminal proceeds from syndicates around the world,” said Chief Don Fort, IRS Criminal Investigation (source).
Vinnik initially denied all the above accusations and also explained that he wasn't the administrator of the BTC-e exchange, but the technician of the platform. He also declared that he had customers that were interested in trading Bitcoin. The BTC-e website went offline a few days before Vinnik's arrest with an "under maintenance" message appearing to visitors.
On July 28, 2017, the US authorities seized the domain BTC-e.com, along with a large number of Bitcoins users held on the exchange. It is important to note that the exchange was operating in Bulgaria and was registered in New Zeland under the parent company "Canton Business Corporation". A penalty of 110 million USD was imposed against the company and 12 million USD to Alexander Vinnik for financial offenses according to this FinCEN document.
Seizure notice on BTC-e website (Source)
The United States ordered the arrest of Alexander Vinnik and also his extradition to US soil from Greek authorities. Here is where the matter becomes complicated.
On August 10, 2017, issued an international arrest warrant for Alexander Vinnik and submitted, in turn, a request for his extradition to Russia. The Russian arrest warrant contained a scam allegation against Vinnik that amounted to 667,250 Rubles or around $9500.
France joined the other interested countries and also asked for the extradition of Vinnik to put him on trial with allegations of cybercrime and money laundering while also accusing him of targeting hundreds of French citizens through the BTC-e platform with his actions.
His defense lawyer in Greece is Zoe Konstantopoulou who was also a politician that presided the Greek Parliament for six months (2015) before quitting the then governing party of Syriza after major differences over the course of austerity plans. She is a lawyer as a profession and took over the case of Vinnik's hearing and extradition after his arrest in Greece. I won't go into many details on his defense but there have been many objections by the lawyers on various legal violations from the Greek justice and political system, after certain pressure from the rest interesting parties. Timofey Mysatov is the Russian lawyer that counsels Vinnik as well.
The legal defense denied the accusations and was mostly focused on the political pressure on Greece by other nations, court procedures, and flaws in handling the situation. The legal procedure ended in Greece since December 2018 without any charges pressed, but the extraditions were still not decided until January 2020 (two and a half years after his arrest).
Vinnik began a hunger strike for his prolonged arrest and at the beginning of 2019 (one year and a half after his arrest), a video was released where he explains his positions and looks really thin, aged and in poor physical condition compared with his images from the time of his arrest.
Alexander Vinnik February 2019
Translated in English:
" I was considering a few days ago what is my status. Legal or something else? Considering legal status it goes without saying that it is undefined. Under what pretext is Greece holding me? No charges are pressed against me, yet I am in jail. On the 26th of January (2019) I should have been released according to their constitution, yet they didn't release me. Am I perhaps a war criminal? Did the Greeks take me as their hostage? We are not in a warzone and we are not waging war against them. Am I perhaps a hostage of the Greek Government? Usually, for hostages, they ask for ransom, still, nothing seems to have been demanded. However, I'm still imprisoned here under an inconceivable status."
In June 2019, Vinnik was going to be released as 18 months was the maximum time of holding a prisoner without pressing charges. The law was re-arranged just for this case alone, in order to keep Vinnik under arrest.
In December 2019, the final decision was made and Alexander Vinnik was going to be extradited originally in France. After the court procedures there he would return to Greece and be extradited again this time to the United States of America. The Greek Courts also accepted Russia's extradition request. So Vinnik is to be returned from the US back to Greece, after the court proceedings end, and face the third extradition this time in Russia.
Vinnik was seeking extradition to Russia without any other country intervening but this might eventually take many years to happen and would probably need a conversation between the interested parties.
Alexander Vinnik during his arrest and two years later (source)
He was extradited to France in January 2020 where he is being questioned about his alleged crimes and waiting for French court procedures to finish. He is expected to return to Greece and extradited again this time to the US.
WHO WAS ALEXANDER VINNIK
Not much is known about this person's history. He gave a brief description at a Greek court about his past and explained how he learned to code when he was young, on a Spectrum computer which was loaned to him for this reason. He explains that he is a technician (programmer) and wasn't part of the administrators of BTC-e. RT calls him a Russian Bitcoin entrepreneur and a pioneer in tech.
He is 41 years old and he has two kids aged today five and nine, and his wife is under brain cancer treatment in Germany, as reported by the above RT youtube video.
He is allegedly owned of the bitcointalk account with the name "WME". Frankly while looking at this guy's posts I got lost. There is so much information to find out and so many suspicious replies to him that it will probably take me weeks to figure out what is going on. Other accounts jump in the discussion to defend him, while others accuse him of stolen funds since 2012.
One of his posts I noticed a scam accusation against the exchange CryptoXchange which, according to him, ripped him off $100k. CryptoxChange wasn't paying back his BTC and kept requesting for KYC. The bitcointalk account "CryptoXchange" is also marked by an admin of the forum as a scammer and there are various accusations against them online. They seem to have shut down their exchange a few months later and operated another similar platform called mrbitcoins for a while. Funny, but this was the name given to Alexander Vinnik by the Greek mainstream media. Anyway, I would need to spend a lot of time to connect the dots and do a proper investigation as too many comments and data seem to be intriguing in most of the discussions this guy "WME" participates. Still, by reading most of his comments and replies to some people that done deals with him they seem to have had their BTC-e accounts frozen.
DISCOVERY - WIZSEC
One of the posts on Bitcointalk that was the most interesting was the one that was his downfall though. Anyway, from the above message in bitcoin's forum it became evident to many that these Bitcoins had a high chance of being stolen. The Mt. Gox hacks were published only in 2014 so it was then that some people began investigating.
In this video, Kim Nillson of WizSec (a security company based on Tokyo ) describes how they manage to track the blockchain transactions from the moment they were stolen to the moment a single account connected to a name was found.
Analysis and tracking of flows across multiple addresses on the Blockchain wasn't something common in the first years after Bitcoin was released. There were people that thought Bitcoin transactions were anonymous and perhaps this was a similar case of misinformation of Vinnik about the Bitcoin blockchain and its transparency.
(Full presentation of Wizsec on Mt.Gox along with better image quality of the above map on this link)
Back then there were no CoinJoin methods available and transactions. Perhaps these people thought that no-one would look and that it would be impossible to connect the account to an actual name. Yet the name seems that it exists and Alexander Vinnik using his bitcointalk account with the name "WME" did a mistake to link this legal paper on a forum post, which contains his real name.
I want to make clear at this point that I don't make a case against Vinnik or be in favor of him. I just report everything in the order I remember and double-checking sources as well. I'm not claiming that this bitcointalk account is Vinnik's. There is always the possibility that someone wanted to cover his tracks and used his name instead. Identity theft is not rare especially online. I'm not saying it isn't Vinnik's either. I post this just to state that this was the main reason he got arrested. This account "WME" was seemingly connected to stolen Bitcoins from Mt.Gox and other platforms. It is police work to figure out if it actually belonged to him or not. I have an opinion on the matter and when I see something fishy I have to call it out as I see it. If anything, all these posts by the WME account along with a lot more that it interacts are strange and could be even made by the same person.
Anyway, according to this article from Bitcoin.com, the Russian authorities received a signed confession where Vinnik is admitting to money laundering and other charges of hacking. This event seems to have been verified by Russian authorities and an ex-lawyer of the defendant and it was seeing as a desperate final attempt to avoid extradition in France and the US and directly sent to Russia.
There will be more from Alexander Vinnik and this story will probably drag on for many years. There seem to be an issue with the US authorities demanding extraditions of foreign citizens from other nations and in this case, this wouldn't happen if Vinnik wouldn't have left Russia. The US never asked for his extradition from Russia as they wouldn't allow it. It is interesting that there is a similarity between the clue that led to the capture of Alexander Vinnik with the clue that Ross Ulbrich (founder of Silk Road) carelessly left behind, as both had given away their real names in posts in the bitcointalk forum.
Also, this is Vinnik's twitter, which right now is set to private, so it will be hard to find out what he was posting there, or if there were more links with accounts and activities. Vinnik no matter what is still a human being and deserves humane treatment and perhaps should be allowed to see his family at some point. I won't make any personal comment as this is a sensitive case that might take a while and my opinion is not important. Still, it seems that in this case, unlike Ross Ulbricht, agents were actually waiting for individual investigators to do their job instead. I wouldn't call the arrest of Alexander Vinnik an investigative success by the authorities in any case.
