The case of the recently arrested Russian money launderer, Alexander Vinnik, is attracting more and more attention as it reveals the extent to which blockchain technology can be used for criminal activities.
The United States government is accusing Vinnik of laundering at least $4 billion worth of assets through a site called BTC-e that allowed users to make anonymous transactions and that reportedly did business in the United States without being appropriately registered.
According to a press release from the US Department of Justice published on 5 August, Vinnik was arrested in Greece at the request of the country’s authorities and was extradited to US soil so he can be judged for his involvement in the money laundering scheme.
Authorities allege that BTC-e did not enforce any kind of AML protocols such as identity and address verifications. Instead, it facilitated transactions for cybercriminals across the world who used Bitcoin (BTC) to launder assets coming from activities like drug trafficking, ransomware scams, and hacking incidents.
Vinnik is being charged by the Department of Justice with 17 counts of money laundering, two counts of engaging in unlawful monetary transactions, and one count related to running an unlicensed money service business.
Activities Facilitated by Vinnik Account for 12% of Global Crypto Laundering
Russian authorities have been asking the United States to send back Vinnik to his home country. Meanwhile, his lawyer recently approached the government to promote an exchange involving US-native captives in Russia like basketball athlete Brittney Griner and former Marine Paul Whelan.
A report from Chainalysis indicated that around $8.6 billion worth of cryptocurrencies were laundered in 2021 – a 30% jump compared to the previous year. Since 2017, Chainalysis estimates that around $33 billion have been laundered through the crypto space.
If Vinnik did launder $4 billion for criminals, he would be responsible for around 12% of the total amount of money laundered through crypto in the past 5 years – a percentage that could effectively make him the most prominent crypto launderer to date.
Why is Crypto so Attractive to Money Launderers?
The decentralized nature of cryptocurrencies makes them the perfect vehicle to launder money from criminal activities as users can make transactions anonymously and decentralized finance (DeFi) platforms do not enforce AML rules.
Peer-to-peer crypto exchanges (P2P) are among the most used for this purpose as users can make transactions without intermediaries. Meanwhile, decentralized exchanges facilitate the process of buying cryptocurrencies by just adding a wallet to the service.
Moreover, hackers have been able to perform attacks on crypto protocols and have used the ecosystem to launder money by making thousands of transactions in a matter of seconds and using many wallets to hide where the funds have ultimately gone.
Recently, the United States government imposed sanctions on the crypto mixer Tornado Cash for facilitating money laundering for cyber criminals. Some prominent incidents include the hack of the Harmony Bridge, which led to a loss of $100 million and the theft of over $600 million from Axie Infinity’s Ronin bridge.
North Korea is at the top of the list of countries with elevated levels of criminal activity involving cryptocurrencies followed by the United States and Russia. In the case of North Korea, most of the incidents involve hacking, ransomware, and other forms of cyber theft.
Meanwhile, incidents in the US are primarily related to scams such as rug pulls and exit scams that seek to siphon money from unwary investors. Finally, Russia is considered a hot spot for money laundering, with Alexander Vinnik’s activities being one of the most notable examples of how countrymen are using the space for this kind of activity.
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