- The US Secret Service’s Ten Most Wanted Fugitives is a showcase of the country’s worst financial criminals
- Among them is BTC-e co-founder Alexsey Bilyuchenko, who is accused of hacking MtGox and helping to launder the funds
- Bilyuchenko’s story parallels that of his associate Alexander Vinnik, who is preparing to plead guilty in the BTC-e case
The US Secret Service’s Ten Most Wanted Fugitives is a who’s who of financial crooks, some of whom come with a $10 million bounty if arrested/convicted. They include hackers, credit card scammers, money launderers, and more. Among their number is a name familiar to those who know a little bit about the darker side of crypto: BTC-e co-founder Alexsey Bilyuchenko. His accomplice, Alexander Vinnik, is preparing to plead guilty to his role in operating BTC-e, but Bilyuchenko’s story is only a little crazier than that of his former partner.
Foundations
Aleksey Viktorovich Bilyuchenko was born in Novosibirsk in central Russia in 1980 and developed a passion and talent for computers, leading him to pursue a career in IT. This peaked when he became the IT manager for a Russian furniture shop chain, but he gave that up and turned to the dark side, launching BTC-e alongside Vinnik in Crimea in 2011.
BTC-e launched just months after the first of several eventually fatal hacks on the MtGox exchange, where the majority of the 850,000 bitcoins stolen from the exchange between 2011 and 2014 would end up. BTC-e got off to a slow start, securing only 20,000 customers by the end of 2012, while MtGox had around ten times that. However, BTC-e’s share was lower because it attracted a very specific kind of clientele: criminals.
BTC-e actively obscured user accounts and activity, anonymized transactions and the source of funds, and lacked any anti-money laundering controls. In short, it was designed for the perpetrators of any financial crimes to cash out their ill-gotten gains almost totally anonymously, not unlike Liberty Reserve.
Goodbye MtGox
BTC-e proved to be a very popular service, with hackers, ransomware scammers, identity thieves, corrupt public officials and narcotics distribution rings all making use of its money laundering facilities to the tune of billions of dollars. As MtGox stuttered and then collapsed in 2014, BTC-e was there to pick up the pieces; by October 2014 it had grown to almost 570,000 users, with many praising its slick performance compared to MtGox’s crumbling infrastructure in its final weeks.
By the autumn of 2016, BTC-e was the third biggest Bitcoin exchange in the world by daily volume, and it looked like Vinnik and Bilyuchenko’s operation was going to be challenging for the top spot before long. However, the US authorities were already onto BTC-e and its founder, leading to Vinnik being arrested in Greece in July 2017. Vinnik used his phone call to speak to his mother, who herself then made a phone call to Bilyuchenko, warning him of what had just happened. Panicking that he might be next, Bilyuchenko, himself on holiday in Crete, took his laptop to the coast near his hotel, smashed it to pieces against the rocks, threw it into the sea and caught the first flight back to Moscow.
WEX
Bilyuchenko set about resuscitating BTC-e, using its database to birth WEX (World Exchange Services) alongside Belarusian associate Dmitry Vasiliev. Things started well for WEX, but in the summer of 2018 customers began to experience withdrawal problems. The exchange was taken offline six months later, with the $450 million worth of cryptocurrencies on its books vanishing without a trace. Bilyuchenko was naturally suspected but, when customers in Russia and Khazakstan began to file police reports, suspicion fell instead on the man that Bilyuchenko had put in the hot seat: CEO Dmitry Vasiliev.
When Bilyuchenko was summoned to testify as part of the investigation into Vasiliev, he told an incredible story: in a trap set up by one of his financial backers, Konstantin Malofeyev, Russian security service operatives had coerced Bilyuchenko into handing over all the WEX holdings in April 2018 on grounds of national security. Only afterwards had Bilyuchenko apparently found out that they were imposters hired by Malofeyev.
Somehow, Bilyuchenko’s story worked, and he was not arrested, with the authorities instead zeroing in on Vasiliev, who was arrested at the third attempt in Croatia in 2022.
Arrest
By now, however, Russian authorities had seemingly twigged that something about Bilyuchenko’s story didn’t add up, and he was arrested in March at a private airfield in Moscow on charges of misappropriating the WEX funds. Arresting officers discovered 190 million Russian roubles ($1.7 million) in cash in two suitcases in his possession while officers searching residences belonging to Bilyuchenko and his accomplices seized another 50 million roubles ($425,000), $1 million and €70,000 in cash as well as computer equipment, hardware crypto wallets, luxury goods, and documents.
Bilyuchenko was taken to his home city of Novosibirsk in central Russia, where he was also hit with a civil claim over the loss. Bilyuchenko was found guilty of embezzlement in September 2023 and was jailed for three and half years, having appealed to Vladimir Putin himself for clemency over the ten years he was expected to receive.
In June 2023, while Bilyuchenko was in the middle of this trial, charges against him were unsealed relating to the 2011-2014 hack on MtGox:
In or about September 2011, Aleksandr Verner and Alexey Bilyuchenko, the defendants, and their co-conspirators…gained and caused others to gain unauthorized access to the Mt. Gox server in Japan, which contained, among other things, the Mt. Gox customer and transaction database and the private keys for Mt. Gox’s Bitcoin wallets.
Bilyuchenko is charged with money laundering conspiracy and operating an unlicensed money services business, charges which ensure that, when he is released from prison for the WEX affair, Bilyuchenko will never be able to leave Russia for a country that has an extradition treaty with the United States.
Extracts from Ultimate Catastrophe – How MtGox Lost Half a Billion Dollars and Nearly Killed Bitcoin by Mark Hunter.
