Suspected Mt Gox bitcoin thief to be extradited to France

Posted: 19 July 2018 5:58 pm

France won the tug of war between Russia and the USA, and strange things are afoot at a related exchange.

Mt Gox was one of the earlier bitcoin exchanges. It's since disappeared, following the theft of about 650,000 BTC, now worth billions.

One of the only publicly known suspects is Alexander Vinnik, whose competing exchange BTC-e handled the stolen bitcoin. According to the BBC, he was seemingly involved in the laundering and distribution of the stolen funds, although it's still not known who was behind the theft itself.

Vinnik, a Russian national, was arrested in Greece in 2017 on a US-issued warrant and held there while Greek authorities worked to detangle two competing extradition requests – one from the United States and one from Russia. France also lodged a request, accusing Vinnik of cybercrime, money laundering of about 133 million Euros through over 20,000 BTC, membership in a criminal organisation, extortion and defrauding thousands of people including about 100 French nationals by launching cyberattacks through his exchange.

On 13 July, Greek courts agreed to extradite Vinnik to France. It was a surprise move, with Greece's Supreme Court previously ruling in favour of extradition to the United States, and then a lower court in Thessaloniki changing directions to France.

Russia took a dim view of the decision and promised reprisals, accusing Greece of "yielding to external pressure."

"It is obvious that Russia cannot leave these actions unanswered," said Russia's ministry of foreign affairs.

So far, Vinnik has maintained his innocence, arguing that he's no more responsible for the origin of funds that pass through BTC-e than any other currency exchange.

Most of the now-billions of dollars' worth of BTC stolen from Mt Gox have probably been long since re-distributed and sold off.

At the same time, Tokyo-based Mt Gox has since ended up breaking new ground in bankruptcy cases in Japan. The exchange declared bankruptcy after the theft was discovered and was left with only about 200,000 BTC.

But in an unprecedented twist, bitcoin's astronomical rise in the following years left Mt Gox with much more than it had at the time of its bankruptcy. Since then, that remaining bitcoin stash has been a source of unease for those fearing a massive sell-off, while Mt Gox creditors – the exchange's users at the time of its bankruptcy – now have until 22 October to file a claim for what they're owed.

Between the unprecedented Mt Gox selloffs and bankruptcy, and now Vinnik's surprise extradition to France, the whole Mt Gox story is a tale that just keeps on giving.

As an added bonus, Vinnik's BTC-e exchange, which was raided and fined by US authorities in July 2017, has also found its way back to the spotlight recently.

It shut down after the raid, then later re-opened as WEX and started onboarding old BTC-e customers. It chugged along, but just a couple of weeks ago anomalies started appearing, such as bitcoin trading at $1,600 premiums.

This too good to be true arbitrage opportunity has some speculating that it's about to exit scam and is just artificially inflating prices to try and trick people into making deposits.

Others have echoed the sentiments, saying that they've been locked out of their accounts and that WEX has stolen their funds.

For its part, WEX has said that it has temporarily disabled withdrawals for wallet maintenance and will be back on 22 July, but it reportedly hasn't blocked deposits which lends some credence to the exit scam suspicions.

At the same time, there are rumours tying the owner of WEX to the downing of Malaysian Flight 17 over Ukraine in 2014 and other militant activity as well as reported ties to underworld figures and conflict financing in the region.

That Vinnik's case simultaneously heats up with a surprise extradition to France is probably just a coincidence. But if someone ever dramatises all this into a movie, perhaps an international spy thriller/heist crossover set against the backdrop of fighting in Ukraine, they can spin it into something more meaningful.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.

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