Mt. Gox Hack Investigation Leads to Charges Against Two Individuals by US Justice Department

The US Justice Department alleges that Alexey Bilyuchenko and Aleksandr Verner gained control of an Mt. Gox server and stole 647,000 Bitcoin from the exchange.

Mt. Gox Hack: Unsealed Charges for Bitcoin Theft and Money Laundering

The US Justice Department charged two men with hacking Mt. Gox and stealing $400 million. A security flaw in the company allowed the hackers to get away with the Bitcoin tokens. Embezzlement, fraud, and money laundering charges have been filed against them.

In the announcement:

The DOJ unsealed charges related to the 2011 hack of the cryptocurrency exchange Mt. Gox and the operation of the illicit cryptocurrency exchange BTC-e. Alexey Bilyuchenko, 43, and Aleksandr Verner, 29, both Russian nationals, are charged with conspiring to launder approximately 647,000 bitcoins from their hack of Mt. Gox. Bilyuchenko is also charged with conspiring with Alexander Vinnik to operate BTC-e from 2011 to 2017.

Bringing justice closer to its goal, this new development sheds light on one of the biggest cryptocurrency thefts in history. The theft of such a huge amount of cryptocurrency caused much damage to investors and brought much uncertainty to the industry.

The investigation should bring closure to the case and set a precedent for future cryptocurrency-related crimes. Bilyuchenko faces additional charges for allegedly planning to operate the BTC-e exchange, which closed in 2017 amid money laundering allegations.

Mt. Gox Hack Revealed: Bitcoin Drain, Fraudulent Exchanges, and Legal Consequences

Prosecutors allege that the two suspects controlled an Mt. Gox server in Japan for at least a year, beginning in September 2011 and ending in May 2014.

The hackers reportedly conducted several transfers during this period, gradually draining customers’ BTC holdings from the exchange. The “vast majority” of their customers’ BTC had been drained by the end of their operation, leaving a trail of substantial losses behind.

Once the men obtained the stolen Bitcoin, they tried to sell them using a different exchange under their control. They allegedly entered a fraudulent contract with an American Bitcoin brokerage firm to carry out these sales. The brokerage firm bought the stolen bitcoins from the hackers by sending wire transfers to offshore bank accounts. The brokerage firm got the coins despite the Bitcoin staying at the hackers’ exchange.

The announcement doesn’t explicitly mention BTC-e as the exchange involved in the fraud, but it’s called “Exchange-1.” The two allegedly received around $6.6 million from the deal.

It was one of the first significant cryptocurrency exchanges, Mt. Gox. In March 2014, the company declared bankruptcy after it claimed the hack caused its insolvency.

The cryptocurrency exchange BTC-e operated between 2011 and 2017. A number of digital currency holdings were sold off by the FBI in 2017, alleging they were being used for money laundering.

Alexander Vinnik, the founder of BTC-e, is currently in prison for running the exchange. Vinnik’s lawyer attempted to exchange prisoners with Russia in May to secure his release.