The oldest bitcoin exchange in the history of the bitcoin industry was officially taken offline last week. BTC-E, operated by Alexander Vinnick, was seized by six different U.S. law enforcement agencies after Vinnick was arrested in Greece for laundering over $4 billion in bitcoin
“BTC-E, the oldest bitcoin exchange in the bitcoin industry, was officially taken down and seized by six U.S. law enforcement agencies last week for its involvement in the theft of $2.21 billion from now-defunct bitcoin exchange Mt. Gox and Bitcoinica.”
In addition to the money laundering, BTC-E also seemed to be the favored bitcoin exchange for cashing out ransomware payments. Chainanalysis, a Google and blockchain analyst firm, confirmed at the Black Hat USA 2017 security conference that 95% of ransomware was cashed out through BTC-E.
Most regions (excluding the non-regulated bitcoin markets) require all bitcoin exchanges to comply to the strict Know Your Customer (KYC) and Anti-Money Laundering (AML) policies. In order to avoid any legal issues, exchanges need to maintain a database of their clients, their clients’ personal information, and any explicit details that go into the processed transactions.
This is why law enforcement agencies have been having a lot of luck in tracking down dark web criminals. This is also why BTC-E managed to slide under the radar for so long. By laundering the bitcoin transactions through exchanges – mixing the inputs and outputs of the transactions – the ransomware operators were able to anonymously cash out their bitcoin.
“BTC-E was able to process 95 percent of bitcoin ransom payments because it had the authority over its KYC and AML systems. Because BTC-E had absolute control over its platform and it operated as a platform for ransomware distributers and hackers, it allowed users to avoid investigations from law enforcement agencies while cashing out their funds.”