BTC-e Controls Just 55% of Customer Funds, Faces Penalties From FinCEN

Ever since the BTC-e exchange shut down unexpectedly, there have been very few updates on the matter. The alleged operator of the exchange remains in custody. A new document regarding the company has been issued by the U.S. Financial Crimes Enforcement Network (FinCEN) which does not bode all that well for Alexander Vinnik or the exchange. Additionally, information regarding BTC-e has been sent to police in the UK. What’s more, it appears that the company barely controls half of its customer funds. 

BTC-e Situation Remains Unclear

[UPDATE] BTC-e provided another update explaining that they indeed only control 55% of customer funds at this time. They aren’t able to work under the BTC-e brand either, due to the FinCEN civil money penalties. The company plans to repay customers eventually, but it is negotiating with investors first in order to do so. For now, returning those funds will require balances to be recalculated and customers taking a hair cut in the form of BTE tokens. This is similar to how Bitfinex resolved its hack, as one BTE was worth 1 USD. Any BTC balance will be subject to repayment in any of seven different cryptocurrencies including Bitcoin, Litecoin, Ether, and Dash.  It is unclear how long it will take to repay this debt.

The arrest of Alexander Vinnik has caused quite a bit of confusion. He is the alleged operator of the BTC-e exchange, although that connection is still somewhat unproven. That being said, FinCEN thinks it has enough evidence to assess civil money penalties against both BTC-e and Alexander Vinnik. That is a major development which could play out in a positive or negative manner for the people still hoping to get their money back.

A document found on FinCEN’s website details several violations pursuant to the Bank Secrecy Act. Since FinCEN has the authority to impose civil penalties on money service businesses and individuals involved in such operations, things are not looking good for BTC-e. Both Vinnik and the company have been indicted in the Northern District of California for money laundering, conspiracy to commit money laundering, unlawful monetary transactions, and running an unlicensed money transmitting business.

According to the document, BTC-e and Vinnik willfully violated Money Services Business (MSB) registration requirements from November 5, 2011 onward. Additionally, they failed to implement an effective Anti-Money Laundering program, nor did they detect suspicious transfers. The latter issue would explain why nearly 95% of all ransomware proceeds have been laundered using the platform. This could only be possible by not having necessary checks in place or by knowingly allowing such transactions to occur in the first place.

That is not the only recent BTC-e news making headlines recently. A large amount of information regarding the company was recently sent to the UK police, including the names of individuals allegedly connected to the exchange. Sergey Mayzus is one of those individuals, but he has claimed there are no ties between himself and the platform. This all stemmed from a group of exchange customers seeking to recover their missing funds through the legal system.

Information residing on the BTC-E Claims GitHub points the finger at Sergey Mayzus and his companies OKPay and Mayzus Financial Services. However, Mayzus claims that neither he nor his companies are related to the BTC-e, its employees, or its owners. Though it is possible that Mayzus had clients linked to BTC-e, no such connection was ever established. Nevertheless, all of the accounts associated with the exchange have been blocked.

This is not the last we will hear about BTC-e and the people looking to get their money back. There is still a lot of uncertainty associated with this exchange and where the money will end up. The latest claim states that BTC-e operators successfully control all the wallets linked to the platform, but there are some who doubt that statement, for obvious reasons. We can only hope that users affected in this fiasco get their money back sooner rather than later.