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Ex-CEO of BTC-e Exchange’s Spin-Off WEX Is Arrested in Italy

Former CEO of now-defunct crypto exchange WEX, a spin-off of controversial BTC-e exchange, was arrested in Italy.

Former CEO of now-defunct crypto exchange WEX, a spin-off of controversial BTC-e exchange, was arrested in Italy.

No official statement to date

Dmitri Vasilyev, who reopened BTC-e exchange as WEX.nz in September 2017, was detained by Italian prosecutors. While no official statement has been disclosed to date, BBC Russia reported the arrest on July 19. In the report, the publication cited an unnamed friend of Vasilev and two anonymous WEX investors. The reason for detention remains unclear.

In April 2019, Vasilyev became the subject of a criminal investigation by the police department in Kazakh city Almaty, as the alleged suspect was charged with defrauding a local investor in the amount of $20,000 through WEX exchange, as crypto media outlet Forklog reported. According to the report, the 32-year-old suspect was announced wanted under an international arrest warrant in the territory of the Commonwealth of Independent States.

WEX, a spin-off of troubled BTC-e, quickly fell under suspicion

Defunct BTC-e, WEX’s parent exchange, still remains subject to a $4 billion fraud investigation by Greece and the United States, with the alleged founder Alexander Vinnik currently in the custody of Greek police, BBC noted. 

Following Vinnik’s arrest in 2017, Vasilyev relaunched the exchange under name of WEX that soon was reported as exhibiting suspicious tendencies including overpricing Bitcoin (BTC) compared to global norms. Eventually, WEX halted withdrawals in July 2018, which led to claims from users that the platform was a scam.

In late 2018, WEX’s fellow exchange and major global crypto trading platform Binance froze funds sent from wallets associated with WEX after users claimed that the exchange was involved in money laundering.

Meanwhile, Russian authorities continue to fight for Vinnik’s extradition to Russia, with Russia’s Commissioner for Human Rights having recently asked the United Nations High Commissioner for Human Rights to help extradite the alleged criminal.

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PwC: Bitcoin Ransomware Hackers Laundered Money via WEX Exchange

Iranian Bitcoin hackers used the WEX exchange to launder Bitcoin acquired through ransomware, according to a PwC report.

Big Four consulting and auditing company PwC has linked Iranian nationals behind Bitcoin (BTC) ransomware scheme SamSam to the crypto exchange WEX in a recent report published in February.   

The report is based on information that was previously disclosed by the United States Department of Justice (DoJ). As per the DOJ, two Iranians — Faramarz Shahi Savandi and Mohammad Mehdi Shah Mansouri — were responsible for creating SamSam. SamSam is a ransomware demanding Bitcoin that reportedly damaged multiple U.S. companies, government agencies, universities, and hospitals. Within 34 months the hackers managed to extort over $6 million in Bitcoin and cause over $30 million in losses.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) also sanctioned two more Iranians, Mohammad Ghorbaniyan and Ali Khorashadizadeh. They were allegedly operating Iran-based crypto exchanges that helped Savandi and Mansouri to exchange the BTC extorted via SamSam.

After analyzing wallet addresses and emails provided by the U.S. government, PwC came to the conclusion that Khorashadizadeh and Ghorbaniyan could be linked to crypto exchange WEX.

WEX was known as BTC-e prior to a rebranding move in September 2017. The exchange rebranded in order to distance itself from a money laundering investigation that shuttered BTC-e in July of that same year. PwC further states that BTC-e was involved in exchanging at least $1.9 million related to SamSam:

“BTC-e is known for its involvement in laundering approximately $4 billion and is responsible for cashing out 95 percent of all ransomware payments made from 2014 to 2017 — of which $1.9 million came from SamSam ransomware.”

Moreover, PwC cites another investigation that links Bitcoin transactions on BTC-e to Russia’s Main Intelligence Directorate of the General Staff (GRU). The cyber espionage group “Fancy Bear” has purportedly been linked to a cyber attack on the Democratic National Committee ahead of the 2016 United States presidential elections.

As Cointelegraph previously reported, Alexander Vinnik, the alleged former operator of defunct BTC-e, was arrested by Greek police back in July 2017 as the DOJ accused him of fraud and money laundering. Russian human rights officials have sought Vinnik’s extradition back to his home country following health complications that are the result of a months-long hunger strike.

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Greek Supreme Court Rules to Extradite Alleged BTC-e Owner Alexander Vinnik to Russia

The Supreme Civil and Criminal Court of Greece has ruled to extradite alleged BTC-e owner Alexander Vinnik to Russia to face several cyber fraud charges, Russian state news agency RIA Novosti reports Tuesday, September 4.

The formal decision on extradition to Russia will be issued September 14, coming into force the same day.

During the actual hearing, the Supreme Court will also consider France’s request on the alleged BTC-e owner’s extradition.

According to RIA, Vinnik agreed with his extradition to Russia. “[This case] is now up to politicians and their will,” his attorney Timofey Musatov stated.

The U.S., France, and Russia are currently arguing about the location of Vinnik’s extradition. Several Greek courts have previously ruled in favor of all three countries, with the final decision taken by Greek Minister of Justice.

Vinnik was arrested by Greek police back in July 2017 as the U.S. Department of Justice convicted him of fraud and money laundering around $4 billion worth amount of Bitcoin (BTC).

France later charged Vinnik with “defraud[ing] over 100 people in six French cities between 2016 and 2018”.

In the same time, the Russian government also intervened in the case, asking to extradite the Russian national to his home country. The amount of fraud Vinnik is charged with in Russia is equal to 667,000 rubles (around $9,800), RIA had reported last year.

Days before the final hearing in the Supreme Court, Vinnik’s attorney Makarov accused French prosecutors of trying to question Vinnik without Greek officials’ permission, Cointelegraph reported last week.

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Bitcoin's Price Is Nearing $10K On a Single, Troubled Exchange

Crypto exchange WEX continues to see prices well out of step with the rest of the market amid the continuation of a near-total freeze on withdrawals.

As CoinDesk previously reported, customers of WEX – a kind of successor to the now-defunct cryptocurrency exchange BTC-e – have been on tenterhooks since July 12 as they’ve largely been unable to get outbound payments processed.

The only exceptions have been tether and zcash, and the price disparities suggest that some WEX users are utilizing those tokens as a way out. The normally dollar-tied tether, also known as USDT, is currently above $2 and WEX’s price for zcash (against the US dollar) is $440, or more than double the prevailing rate on the broader market.

Those look to convert their money held on WEX to zcash or tether just to get it out of the exchange must pay a steep price, according to one customer.

“If you buy zcash on Wex, you will have to sell it somewhere else much cheaper, losing up to 50 percent, as the USDT rate is now $2.195 on Wex,” Grigory, a systems administrator from a town in Russia called Ivanovo, told CoinDesk. Further, the ability to make withdrawals has become unavailable again from time to time, he added.

In the absence of word from WEX staff, users have taken to social media and the exchange’s chat box to wonder aloud about the story behind the delay.

Cryptocurrency prices have risen on the site as well, with the value of bitcoin exceeding $9,600 as of press time, or more than $1,400 above the price recorded on CoinDesk’s Bitcoin Price Index (BPI). Prior to the withdrawal issues, prices on the exchange had notably spiked above $9,000.

WEX representatives have not responded to multiple requests for comment.

Waiting game

The situation on WEX has been brewing for more than a week, the exchange’s own statements show.

On July 12, WEX announced on Twitter that withdrawals of fiat and cryptocurrencies were blocked due to the “database migration and other maintenance.”

Later that day, it was said that maintenance had been completed, and some coins, including zcash and tether, were available for withdrawal. But major cryptocurrencies like bitcoin, bitcoin cash, ether, litecoin and dash were to remain unavailable until July 22, according to a post on July 16.

The last public message via Twitter was posted on July 19, saying, “Maintenance has finished successfully.”

However, when July 23 came, exchange customers kept complaining that withdrawals were still blocked.

“No Withdraw is working. It is 23rd now. Maintenance fail can happen, but no information is worst. After BTCe now WEX?” said user @Pete11240362.

“Administrators, if you can’t resolve the problem right now, say: maintenance works in process. Get smart, give some feedback,” demanded Russian-speaking user Sergey Ionkin, who goes by the handle @dear_enman.

Some of the affected users took to Telegram to discuss the situation. One of the groups was promoted and possibly created by Dmitry Vassiliev, an official owner and CEO of WEX, who previously told CoinDesk that he lost control over the exchange due to the intervention of some people he declined to identify.

On Monday, a user in one of the channels claiming he is Dmitry Vassiliev – using two similar usernames, (Dmitry Vasiliev and Dmitry wex.nz) – wrote that he had agreed to register the exchange in the name of the new beneficiaries who are already de facto managing WEX.

The user claimed that the deal is going to take place on Thursday, and promised to reveal the names of those beneficiaries if they don’t fix the situation on that day. Vassiliev stopped answering CoinDesk’s inquiries after a brief exchange on July 12.

No easy ways out

According to Grigori, avenues for actually taking money off the exchange exist – but at a price.

Grigory told CoinDesk he has had 0.1 BTC waiting in limbo on WEX since July 12. He said he started using WEX in the end of 2017 because he liked that the exchange didn’t require ID verification.

For the most of time everything had worked fine, he explained: he had been able to withdraw coins within an hour or less, and fiat-denominated funds would appear in his e-payment account in several hours after the withdrawal transaction.

But that changed earlier this month, he told CoinDesk. The tech support on WEX has provided no reasonable explanation and only recommended waiting until the maintenance is over, Grigory contended.

Fiat withdrawals were ceased in that period, too, though the ability to withdraw funds via so-called WEX codes remained for a time. Users would generate a special code with their accounts and then exchange those codes for fiat currency on specialized websites, which would sent a corresponding amount of dollars or rubles to users’ accounts at Russian payment services like Yandex.Money or Qiwi.

But this is no longer a viable solution, according to Grigory.

“At some point, the offers to buy WEX codes disappeared from those exchange websites as there were enormous numbers of people who wanted to sell them,” he told CoinDesk, adding:

“Now people who wanted to quit at any price have already quit, but the exchange rate is still bad.”

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Court Approves Alleged Bitcoin Money Launder's Extradition to France

A Russian national accused of laundering billions of dollars on the now-defunct crypto exchange BTC-e could soon be extradited to France following a court decision.

Since his arrest last summer, Alexander Vinnik has been at the center of a legal tug-of-war between the governments of Russia, the U.S. and, more recently, France, all of which are seeking to extradite him.

Vinnik, who has maintained no wrongdoing from all charges, had been awaiting a decision from Greek authorities on which country he would ultimately be sent to, though in the past he had expressed a preference for extradition to Russia.

According to the Associated Press, the Greek courts decided Friday that Vinnik would be sent to France in light of accusations of his involvement in cyber attacks against some 100 French nationals. The decision drew swift criticism from the Russian government in wake of the expulsion of two Russian diplomats from Greece just a day prior related to tensions over the entry of Macedonia into the NATO military alliance.

Ilias Spyrliadis, Vinnik’s defense attorney, was reported by the Washington Post as saying that Vinnik will appeal the decision and continue to maintain his innocence from all criminal charges.

Indeed, this is not the first appeal Vinnik has made before Greek authorities, pushing back on the green light offered last December that would have effectively extradited Vinnik to the U.S.

The U.S. government claims Vinnik was the “operator” of BTC-e and utilized the platform to launder some $4 billion over the course of six years. Levying a $110 million fine against the exchange and a $12 million penalty against the Russian national himself, Vinnik would face up to 55 years in prison if convicted in the U.S.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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Greek Court Rules to Extradite Alexander Vinnik, Accused of Laundering $4 Bln in Bitcoin

A Greek court has ruled to extradite the alleged former operator of crypto exchange BTC-e, Alexander Vinnik, to France, local news outlet CNN Greece reported Friday, July 13.

The 39-year old Russian national Vinnik, also known colloquially as “Mr. Bitcoin,” was indicted by U.S. authorities on charges of fraud and money laundering last year, reportedly involving up to $4 billion in Bitcoin (BTC).

Vinnik’s Greek lawyer Ilias Spyrliadis confirmed to Russian news agency TASS that “the court has granted France’s request for Vinnik’s extradition.” Spyrliadis also revealed that he is planning to appeal against the court’s decision in the Greek Supreme Court.

According to CNN Greece, Vinnik himself challenged the decision of the Greek court on extradition to France, denying the allegations of French authorities, who issued a warrant, in which the alleged BTC-e owner was accused of “defraud[ing] over 100 people in six French cities between 2016 and 2018.” Vinnik responded that he was “transferring e-money through a platform,” considering it as “legitimate personal transactions.”

Vinnik’s lawyer Spyrliadis assured Russian BBC that the latest extradition to France would lead to a further extradition to the U.S., because “otherwise the U.S. cannot get him, since the extradition process was blocked.”

The Russia’s Ministry of Foreign Affairs issued a comment July 13 in response to the events, accusing the Greek authorities of “continu[ing] to complicate relations with Russia.” The Ministry of Foreign Affairs claims that Russia’s request to extradite Vinnik should have been given priority over France’s, concluding “[i]t is obvious that Russia cannot leave these actions unanswered.”

On July 25, 2017, Vinnik was arrested by Greek police under the order of of the U.S. Ministry of Justice, following the closure of once major cryptocurrency exchange BTC-e, allegedly owned and administered by Vinnik.

Having publicly stated his innocence in September 2017, Vinnik also denied his involvement in the Mt. Gox hack back in 2011 after a group of Bitcoin security experts claimed that Vinnik had a direct relationship to the incident.

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Something Strange Is Going On at a Crypto Exchange Called WEX

Users of WEX, the cryptocurrency exchange built on the ashes of BTC-e, are reporting withdrawal problems, raising new questions about an already mysterious trading platform.

“‏Dear Wex, when withdraws will enable ??” asked Twitter user Alireza Moosavi on Friday, joining a crowd of Wex customers complaining they couldn’t withdraw their funds for the second day in a row.

Ehsan Mahmoodi similarly inquired, “hello, why withdrawal is disabled?”

A third user, Hasan Gusseynov, asked the exchange, in Russian, “When will everything be ok?”

The user complaints follow odd trading activity observed on the exchange. Earlier this week, CoinDesk reported that the price of bitcoin (against the U.S. dollar) shot up to nearly $9,000 on WEX, while it was still in the $6,000 range practically everywhere else.

Observers say the anomaly could have been due to a number of reasons, from recently-raised fiat withdrawal fees on the exchange to suspicions of insolvency. As of this writing, the USD price of bitcoin on WEX was $7,451, more than $1,200 higher than the price recorded on CoinDesk’s Bitcoin Price Index (BPI).

Stepping back, WEX was launched last year in an apparent effort to resurrect BTC-e, a long-running bitcoin exchange that was targeted and eventually shut down by U.S. and Greek law enforcement officials. A Russian national named Alexander Vinnik was arrested and charged with laundering billions of dollars on BTC-e, and U.S. regulators hit the exchange with a $110 million fine.

Although WEX claimed to be unrelated to BTC-e, its website design and trading pairs were very similar and it was pitched as a service for former BTC-e customers.

Questions aside, posts on social media as well as WEX’s chatbox indicate that the withdrawal problems remain ongoing as of press time, though a note on the exchange’s official Twitter account claimed that user funds are secure.

The developments also follow a string of reports from Russian media outlets detailing the murky background of the exchange, as well as a reported legal effort filed by one of BTC-e’s former users.

Unanswered questions

In a July 12 post on Facebook, Dmitry Vassiliev – who, according to Singapore records obtained by Russian news agency RBK, is listed as the owner of WEX’s operator, World Exchange Services – attributed the price disparities to the actions of Dmitry Sutormin, who he described as a former WEX manager.

Vassiliev explained that Sutormin, a vice president of the Russian Association for Cryptocurrencies and Blockchain and a venture investor in Russia, had been selling a high number of “WEX codes,” which could be redeemed on the exchange for cryptocurrency.

Sutormin “carried out the purchase and sale of WEX codes in any volumes,” Vassiliev explained, “which means that there are a lot of codes on the market … now all those who bought those codes want to buy bitcoin, exchange rate goes up, as very few wish to sell.”

However, talking to CoinDesk via Facebook Messenger, Vassiliev said he’s not sure what Sutormin’s role is now, because, as he admitted, at some point he lost control over the exchange. He would not go into additional specifics.

And when reached via Telegram, Sutormin said that he has no connection with WEX and has never worked there.

“I bought and sold my own codes, I was, in fact, the exchange’s client,” he explained. When asked why he would sell his codes, he said he was “affected by the hype around cryptocurrencies,” adding that it’s a popular business in Moscow.

RBK recently dove into the topic during a long piece on WEX. RBK reporter Andrew Zakharov attempted to conduct such a deal, pretending that he wanted to buy a large amount of bitcoins through a meeting in Moscow and contacting Sutormin who, in turn, connected him to other people for the transfer of money.

Meanwhile, earlier this week, the Russian cryptocurrency website CoinRadio detailed a lawsuit filed by a former BTC-e customer named Pimporn Carty. The website also published a copy of the claims made against WEX.

Carty reportedly sued WEX over funds previously held on BTC-e prior to its collapse, arguing that once she was able to regain access, some of the funds went missing, including more than 11,000 litecoins. While a hearing on the issue was reportedly scheduled for July 12, and referenced in Vassiliev’s Facebook post, it’s unclear whether the meeting took place or, if so, what the outcome was.

Who’s in charge?

Indeed, statements from Vassiliev suggest that it’s not entirely clear who is in charge of WEX at the moment.

RBK also reported that Vassiliev was planning to sell the exchange to Dmitry Khavchenko, a former volunteer fighter in the war in Ukraine and a participant of the militia forces in Crimea that supported the Russian annexation in 2014.

Khavchenko, in turn, told RBK that he was going to move WEX’s office to Crimea and register the managing company in the war-torn region of Ukraine known as Donbass.

According to RBK’s sources, Khavchenko and other people engaged in the conflict in Ukraine are already involved in the exchange’s management, including people connected to Konstantine Malofeev, who has been cited in the press as one of the shadow sponsors of East Ukrainian militants.

WEX denied that the exchange is going to be sold on Twitter, and the exchange did not immediately respond to questions regarding who is in charge or why, exactly, its prices shot up earlier this week.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.