Hunting the missing millions from collapsed cryptocurrency

Hunting the missing millions from collapsed cryptocurrency

Hunting the missing millions from collapsed cryptocurrency

A Russian computer programmer involved in the collapse of a big cryptocurrency exchange says he was tricked into handing over its entire assets to fraudsters posing as FSB agents, according to documents obtained by BBC Russian.

Cryptocurrency – Alexei Bilyuchenko was a key player in Wex, which stopped trading in 2018, leaving customers unable to access investments totalling nearly half a billion US dollars. BBC Russian has spent months investigating the murky world of Russian cryptocurrency trading, trying to find out what happened to the money.

It’s a story worthy of the BBC TV drama McMafia, involving an unlikely cast of characters from computer geeks and FBI agents, to a billionaire oligarch with ties to the war in Ukraine.

How two friends cornered a market

The story begins in the Russian city of Novosibirsk in August 2017 where Alexei Bilyuchenko, a former IT manager for a furniture shop chain, was lying low having narrowly escaped arrest on holiday in Greece.

Six years earlier he and business partner Alexander Vinnik, an electronic cash transfer specialist, had met online and made a life-changing decision to get involved in cryptocurrency trading. Described by friends as shy men who preferred computers to people, Alexander Vinnik and Alexei Bilyuchenko set up an exchange called BTC-e which was to become notorious.

Like similar exchanges around the world, BTC-e offered investors the chance to use real money to buy virtual currencies. Unlike other exchanges in Europe and the US, BTC-e did not ask customers for their ID, meaning that as well as appealing to legitimate investors, it also offered a potential way for organised criminals to launder money.

Customers flocked to invest in BTC-e and, according to Global Witness, by 2016 it had become the third largest cryptocurrency exchange in the world. The two partners communicated online and they only met in person in 2014 when their daily bitcoin trading reached $2m. By the time it hit $10m in 2016 they held a family party in Moscow.

In July 2017 they went on holiday to Greece, unaware US federal agents investigating international money laundering were on their trail. The FBI suspected BTC-e was involved in hiding funds stolen from the hack of another bitcoin exchange, Mt Gox. Cybercrime experts also thought it was being used by the mysterious Russian hacking group Fancy Bears.

A warrant was issued for Alexander Vinnik’s arrest and Greek police detained him on the beach, in front of his wife and children. His mother called Alexei Bilyuchenko, who was in a different resort. In a panic, he smashed his laptop, threw it into the sea and jumped on the next flight to Moscow.

Billionaire with ties to Kremlin

Back home in Novosibirsk, Mr Bilyuchenko decided to try to recoup his losses by setting up another exchange called Wex (World Exchange Services).

The FBI had seized BTC-e’s website but he still had the back-up servers and, via Wex, he was able to return investments to some BTC-e clients.

At this stage, according to the version of events he later told police, and which has been shared with the BBC, Alexei Bilyuchenko decided he needed a backer to offer some protection.

He says he was introduced to Konstantin Malofeyev, a Moscow-based billionaire, with strong ties to both the Kremlin and the Russian Orthodox Church.

This article originally appeared on bbc.com To read the full article and see the images, click here.

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