Arrest of Alexander Vinnik

The big news today is the arrest of Alexander Vinnik (38) in Greece on suspicion of money laundering of some $4bn USD worth of Bitcoins.

This is an event I have been waiting, as well as various persons, because it means we can finally disclose a lot of elements we have been working on which we had to keep undisclosed until recently because it could have prevented this arrest from happening.

Vinnik was just arrested in Greece, which means this case is finally in a state where disclosing information is not going to compromise his arrest. I am guessing US law enforcement convinced him to come to Greece one way or another as it is quite often the case (for example, in the book Crack99, a US prosecutor explains how they trapped the webmaster of a site selling cracks by promising him money and having him travel overseas - I am guessing a similar method was used here, unless Vinnik was already planning to travel to Greece with a different goal in mind).

Anyway the point is until now, disclosing what we know could have tipped him into not leaving Russia. Most countries in the world will not extradite their own citizens, which makes sense but for this specific case prevents anything to be done.

Now the question is to know how long it will take for him to be moved to the US. Depending on local laws and on Vinnik himself, it could take from hours to months.

One thing a lot of people have been asking is why was Vinnik arrested only for money laundering, and not theft. I am guessing there are many reasons for this, but the main reason is likely because it was easiest to build a case based on money laundering. When a country asks another country for extradition of an individual there are various steps to be taken, and usually both countries will need to agree there was indeed a crime. It means the requesting country will need to prove its case and provide enough evidence.

As such I am guessing we will see other charges brought up after Vinnik is on US soil, and in the meantime more details may be made public. Either way the MtGox theft has been flowing to wallets controlled by Vinnik from the very beginning, without any wallet in between, and there is no evidence of any other party being involved.

Evidence points without much doubt to Vinnik being not only behind the money launderer of those coins, but the actual theft.

For MtGox creditors this means a lot. It means justice will finally be brought against the actual criminal behind this case, but also that there is a chance, however small, to see some coins recovered.

As for the actual theft, there is still a lot to be investigated. Evidence so far points toward one of MtGox’s bitcoind based wallet being stolen sometime in Sept 2011, and being used afterward to steal bitcoins. We do not know yet how this wallet was stolen, and at the time MtGox still ran on rental servers from a cheap hosting provider. From there the theft went in small increments over time, making it difficult to detect, focusing on newly deposited coins from users who have been re-using bitcoin addresses issued by MtGox.

Because at first nobody knew exactly how the bitcoins were stolen, the focus had been on the way bitcoins moved in/out of MtGox on the blockchain. It is a multiyear effort by various parties - from law enforcement to investigators hired by the MtGox trustee to third party independent investigators - which finally bore fruits some 3 years and half later.

Considering the efforts that went into this investigation and were required to reach this point, I dare say that there was little chance for us at MtGox to detect this at the time, especially considering the fact we were already fighting on various fronts, from compliance to daily hacking attempts to various other issues. At the time of my arrest the Japanese police was still convinced there was no theft of Bitcoins at all from MtGox. Only few people suspected there could be an actual theft at the time, and my arrest was seen for a bit at the final point of the MtGox saga.

And yet, here we are. I must say this is something I have been waiting for this since that day of February 2014 when I stood in front of the cameras to announce the bankruptcy of MtGox. As far as I am concerned the MtGox thief has been finally arrested. He stole some 630,000 BTC from MtGox (according to Wizsec), but he also stole much more from everyone involved.

Justice shall finally be served.