Cryptocurrency exchange BTC-e fined $110M for violating AML laws

The US government has fined BTC-e, one of the largest cryptocurrency exchanges by volume, $110 million for willful violations of Anti-Money Laundering (AML) laws.

This follows the arrest of Russian national Alexander Vinnik, one of the operators of BTC-e, earlier this week. BTC-e, which has conducted over $296 million in transactions of bitcoin alone, kept its geographic location and ownership hidden all these years.

The Financial Crimes Enforcement Network (FinCEN), working in coordination with the U.S. Attorney’s Office for the Northern District of California, assessed a $110,003,314 civil money penalty against BTC-e a/k/a Canton Business Corporation (BTC-e). It assessed a $12 million penalty against Vinnik for his role in the violations.

According to FinCEN, BTC-e facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking. The exchange lacked adequate controls to verify customer identification, conduct due diligence, and monitor transactions. Investigation revealed that the exchange’s user chat was used to openly discuss criminal activities, while its customer service representatives offered advice on handling funds obtained from illegal drug sales on dark net markets like Silk Road, Hansa Market, and AlphaBay.

Among other things, the investigation also revealed that BTC-e processed transactions involving funds stolen between 2011 and 2014 from the now-defunct, Mt. Gox (over 300,000 bitcoin). FinCEN said that it has also identified at least $3 million of facilitated transactions tied to ransomware attacks such as “Cryptolocker” (at least $800,000) and “Locky” (over 6,500 bitcoin). Further, BTC-e shared customers and conducted transactions with the now-defunct money laundering website Liberty Reserve.

“We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate U.S. anti-money laundering laws,” said Jamal El-Hindi, Acting Director for FinCEN. “This action should be a strong deterrent to anyone who thinks that they can facilitate ransomware, dark net drug sales, or conduct other illicit activity using encrypted virtual currency. Treasury’s FinCEN team and our law enforcement partners will work with foreign counterparts across the globe to appropriately oversee virtual currency exchangers and administrators who attempt to subvert U.S. law and avoid complying with U.S. AML safeguards.”

When accesses at the time of writing, BTC-e’s official website is offline and displays the message “Site is under maintenance. We apologize for the inconvenience.”

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