Throwback Stories #5: Crypto Espionage

Dominik Olech
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What really motivates the blockchain industry are the people who stay behind every project. Their ideas push the cryptocurrency world ahead.

After all, every scam, fraud, or deception needs someone who will develop a mischief plan – whatever it is intended to do. Those villains of the cryptocurrency industry are truly fascinating individuals, worthy of being a character in some thriller movie. This week’s Throwback Story will focus on one of such people – a person closely related to the Mt. Gox case. Get ready for the story full of intrigues worthy of an international spy movie.

From Russia with Love

We’re talking about Alexander Vinnik, a Russian individual alleged to be responsible for laundering money stolen from this infamous exchange. He was an operator of BTC-e exchange, which was only a cover-up and tool for proceeding funds from Mt. Gox. This procedure lasted until July 2017 when Vinnik was arrested in Greece at the request of the United States. He was spending a family vacation at that moment.

Detained, he didn’t confess to allegations, claiming he had only been doing his job as an operator of the exchange. Nevertheless, Vinnik stayed in Greek prison, and since the arrestment, the governments of the U.S., Russia, and France demand his extradition – but none of them have acquired permission yet. 

The question where he should be transferred is the primary element of this story. It seems like every country has its own interests in Vinnik’s interception. Moreover, he is officially seeking extradition to Russia. So, why governments are obsessed with this particular hacker? To find an answer, we need to take one step back and take a closer look at creditors of Mt. Gox and their attempts to retake lost funds.

Quantum of Solace 

We described a full story of Mt. Gox fall in one of the previous chapters of Throwback Stories. But since it is an integral part of the Vinnik case, we have to mention some details about it. After the exchange’s collapse, all former users were left with nothing. Some people lose life savings in this first major catastrophe in the blockchain industry. No wonder that a significant number of those people began an unequal fight for retaking their properties. 

At first, the main hope for them was the Japanese law. Years went by, but no solution has been proposed. Until suddenly, the unexpected help came from Russian law firm ZP Legal. It offers to recover up to $2 billion of lost funds. Despite a surprisingly high fee for this service (50-75% of recover funds and an additional $320 per hour of work is a tremendous price), some people are considering the proposition. But maybe this unexpected help have a hidden meaning?

On His Majesty’s Secret Service

A different view on the whole case was presented in the CoinDesk article about Mt. Gox stolen funds. According to some victims, the offer seems to be only an attempt to bring Vinnik back to Russia through the extradition process. If ZP Legal attracts enough former creditors of the exchange, it might be possible for Greek law enforcers to consider the case as Russia’s interior business. 

Why would ZP Legal try to achieve this goal – especially since Bitcoin isn’t even regulated and doesn’t have legal status in Russia? According to this theory, the Russian government is afraid of falling Vinnik into American custody. Former BCT-e operator might have some information about the eventual role of the exchange in influencing the 2016 presidential campaign in the United States. Allegedly, Vinnik could link Russian elites with Fancy Bear, a hacker group responsible for the attack on the Democratic National Committee email server.

Moreover, as one of the former Mt. Gox users noticed on his Medium blog, Alexander Zheleznikov, ZP Legal’s managing partner, may be connected with the Russian criminal underworld. He is also related to the Night Wolves motorcycle club, supported by Vladimir Putin. And since we came to the president of the Russian Federation – he personally asked then Greek Prime Minister Alexis Tsipras in January 2019 for Vinnik extradition. It is the ultimate evidence that Russia is willing to see him within its borders.

Of course, Zheleznikov denied those accusations, claiming the main goal of ZP Legal action is, as he told CoinDesk: “form the legal practice, help the creditors and, in case of success, make money.”

Live and Let Die

And what about the main character of this story? How is Alexander Vinnik going through his unexpectedly long Greek vacations? According to media reports, not well. In May 2018, Russian news agency Sputnik informed about an uncovered assassination plot on Vinnik’s life. According to Sputnik’s source, the plan assumed poisoning him, and it was “linked to the criminal world.” Maybe because of the perspective of being poisoned, but more likely as a form of protest, he began a hunger strike.

What are the perspectives for Vinnik’s future? If the United States manages to convince Greece for the extradition, he will spend up to 55 years in prison for money laundering, conspiracy, and transacting in cash obtained through illegal means. Moreover, the FBI will be probably very interested in his alleged knowledge about Russian elites and interference in the presidential campaign. If Vladimir Putin manages to get what he wants, Vinnik will come back to his motherland, where… everything may happen.

No Time To Die

What the story of Alexander Vinnik tells about the crypto industry? It definitely shows that the stake within it is much higher than our own wallets. Much money has been transferred (and it is still being transferred) through exchanges around the world – and global powers like the United States, Russia, or China aren’t blind on this process. They may ignore crypto superficially, but who knows what will be their next step?

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