Collapsed Bitcoin Exchange ‘Expert’ Might Hold the Keys to Russia’s U.S. Election Meddling

05.09.2018

Russian citizen Alexander who is being held in a jail in Greece could shed light on the ongoing investigation over Russia’s interference with the U.S. politics. According to a report in Bloomberg, Vinnik, 38, may be aware of how Russians in U.S. Special Counsel Robert Mueller’s crosshairs used Bitcoin to obscure their money trail.

Vinnik was detained in July 2017 in Greece after U.S. prosecutors in San Francisco accused him of supervising BTC-e, a now defunct cryptocurrency exchange that allegedly helped criminals launder over $9 billion.

BTC-e, according to cryptocurrency analysis firm Elliptic, handled some Bitcoins traced to Fancy Bear, a hacking unit of Russian military intelligence officers who Mueller separately accuses of stealing and releasing Democrats’ emails to sway votes in the 2016 elections.

Fight for Extradition

The U.S. has been trying to get its hands on Vinnik for more than a year. Greece’s Supreme Court ruled in December that he could be extradited to the U.S. to face the charges in San Francisco. But the process has been stalled by the requests from Russian and France, who both allege that Vinnik committed cybercrimes against their citizens. At the same time the link outlined by Elliptic could explain why Russia has threatened retaliation against Greece if it hands him over to either the U.S. or France.

To further complicate things, the court in Greek city of Thessaloniki agreed in July this year to extradite Vinnik to France.

According to Vinnik’s lawyer, Ilias Spyrliadis, he denies both the U.S. money-laundering accusations and the French charges. Neither did Vinnik have control over the billions of dollars that U.S. prosecutors say ran through BTC-e, the lawyer said.

“I insist that I did not cause any damage to these countries or to the nationals of these countries,” Vinnik said. “I had no knowledge of illegal transactions.”

Vinnik wouldn’t comment on the Russian fraud accusations. Still, as an alternative to extradition, Vinnik has offered to work with Greek and possibly other authorities from his current location, his lawyer said.

In the San Francisco case, the U.S. says that Vinnik and BTC-e catered to cybercriminals and allowed them to launder criminal proceeds from Bitcoin and other digital currencies and turn them into cash. The exchange didn’t vet customers, letting them move money in and out anonymously. To set up an account all a person needed was a username, password and email address, which often bore no relationship to the identity of the user.

Link Between Fancy Bears and BTC-e

That sort of service matches a description by Mueller of how the Russian military intelligence officers layered transactions through cryptocurrency exchanges to maintain anonymity when they bought time on servers they used to launch attacks.

Elliptic used details provided in the indictment, such as a transfer of exactly 0.026043 BTC on Feb. 1, 2016, written onto blockchain. The company then used software it has developed to identify the origin of the funds for those transactions.

Source: Elliptic

“There was a strong link between much of the funds allegedly used by the Fancy Bear group and BTC-e,” said Tom Robinson, Elliptic’s chief data officer. “What I can’t say for certain is whether Fancy Bear obtained them directly from BTC-e, or whether there was an intermediary.”

I July this year the U.S. Department of Justice released a 29-page document where a dozen of Russian operatives were revealed to have used Bitcoin heavily to fund the DCLeaks operations and propaganda campaign.

However, Vinnik’s lawyer insists that he couldn’t have known who exactly was using the exchange. He also added that while Vinnik was an expert working for BTC-e he was “in no way running it.”

“Mr. Vinnik could sometimes see a passport and ID when performing the transactions, but was in no place to know whether this person was using a fake ID, whether he or she was wanted by Interpol or involved in anything,” Spyrliadis said.

The latest turn in the Greek matter came Tuesday, when the country’s Supreme Court was scheduled to hear arguments on extradition requests from France and Russia. Ilias Spyrliadis said late that he expects the court to rule on September 19.

Hacker Insights

Vinnik is one of several Russian hackers indicted by the U.S., some of whom could provide insights into Russian cybercrime beyond their individual cases.

Yevgeniy Nikulin, who was extradited from the Czech Republic and is charged in San Francisco with hacking LinkedIn and Dropbox in 2012, is of interest in the U.S. probe of election meddling, a Justice Department official said last week. Peter Levashov, a Russian programmer who has claimed he worked for Vladimir Putin’s ruling party, is charged in Connecticut with cybercrimes linked to spamming.

A cooperating Vinnik would open the door to the U.S. gaining strategic information on Russian hackers, said Arkady Bukh, the lead attorney defending Nikulin. Getting access to emails, names and bank accounts related to Russian hacking is what Vinnik’s case in the U.S. is really about, said Bukh, who isn’t representing Vinnik.

“Cryptocurrency exchanges are “extremely important and of great interest to the U.S.,” said Bukh, who added that he had been in touch with Vinnik’s friends about getting him legal representation outside of Greece.

Vinnik meanwhile insists that “the U.S. is kidnapping Russian citizens through third countries,” adding that “France is just another way, another link for my extradition to the U.S.”

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Tags: Alexander Vinnik, BTC-e, Russia, USA