[2019-11-18] Russian Intelligence FSB Linked to $450 Million in Missing Bitcoin

[bbc.reporter]

There might be more behind this story. Why would Russian intelligence claim and collect Wex funds randomly?

I have said before that some exchanges might be created for money laundering with the help of criminal organizations. I did not think of intelligence agencies however hehehe.



In late 2018, Russian-based crypto exchange WEX collapsed amidst accusations of money-laundering the disappearance of hundreds of millions of dollars in bitcoin and other cryptoassets. According to a BBC report published Nov. 15, the Russian FSB intelligence agency may have played a role in misappropriating the lost funds.

WEX was previously known as BTC-e before being shut down in 2017 by international authorities for its alleged involvement in money-laundering activities. Alexander Vinnik, the exchange’s alleged operator, was arrested at the time and accused of laundering more than $4 billion in cryptocurrency since the exchange’s launch in 2011.

According to the BBC report, WEX/BTC-e co-founder Alexey Bilyuchenko says he was forced to hand over information about customer’s digital wallets to members of the FSB in 2018, which the intelligence agency allegedly used to obtain more than $450 million in user funds.

Bilyuchenko reportedly received multiple calls threatening to close the WEX exchange if he did not comply. According to the report, the WEX co-founder was taken to FSB offices in Moscow over the course of three days in April 2018, where he handed over flash drives containing details on accessing exchange user funds.

Bilyuchenko says he was told that WEX client money would be transferred to the “FSB Russia Fund.” Several months after handing over the data, WEX froze customer funds and withdrawals, before completely shutting down in late 2018.

Read in full https://www.cryptoglobe.com/latest/2019/11/russian-intelligence-agency-fsb-linked-to-450-million-in-missing-wex-crypto/

[CryptoBry]

This is a truly sad story. This staggering WEX failure illustrates two big things: One, it is truly dangerous to rely on a centralized exchange especially one that is based in a "rogue" country like Russia where the law is the government and you must comply what authorities are ordering you to otherwise our life can be hinging on it. This is my way of saying that we should never trust any exchange based on Russia or any similar countries. I am not wondering why Binance relocated itself to Malta away from Hong Kong which is now under the China regime. Two, this is clearly a display of the power of the government to confiscate and corrupt anything that is under its control. Remember that "Power tends to corrupt, and absolute power corrupts absolutely." Though this can be the case even in democratically-leaning countries, the difference is that in controlled countries they are not that free to expose the corruptions happening in higher places.

[Kyraishi]

Jesus Christ, what a bloody shitshow. Every party is in the wrong here, and everyone has fucked up.

The individuals and customers for storing such large amounts of crypto-currencies on a centralized exchange.
The exchange for complying and not taking measures to keep their users safe.
The government for seizing funds that are not there, and there's a huge chance that a lot of the funds have been "diverted" and we see some random people suddenly get rich overnight...

[Kakmakr]

Remember when we said, DO NOT store large amounts of coins in exchanges.... well that was not just to prevent you from losing coins to hackers, it was also to prevent you from losing coins to corrupt governments.

The exchanges are an ideal target for hackers and corrupt governments, because it is a centralized service that can be targeted. I cannot stress it enough, "control your own Private keys or you will not own any bitcoins" 

People should rather use decentralized exchanges or trade P2P like Satoshi intended it to be. 

[error08]

Remember when we said, DO NOT store large amounts of coins in exchanges.... well that was not just to prevent you from losing coins to hackers, it was also to prevent you from losing coins to corrupt governments.

The exchanges are an ideal target for hackers and corrupt governments, because it is a centralized service that can be targeted. I cannot stress it enough, "control your own Private keys or you will not own any bitcoins" 

People should rather use decentralized exchanges or trade P2P like Satoshi intended it to be. 

It's inevitable, hackers and corrupt governments or intelligence agency mentioned here.
Who knows it will happen? Everyone knows the risk when we deposit funds to an exchange.
Even for decentralized exchange can't provide everything you need, convert to fiat currency and withdraw to your bank account for example, because of it will lead to another problem.

Operators of decentralized exchanges can face legal consequences from government regulators. One example being the founder of EtherDelta, who in November 2018 settled charges with the U.S. Securities and Exchange Commission over operating an unregistered securities exchange.


Source Wikipedia

[Lucius]

I will not go into any conspiracy theories (at least not too much), but it seems to me that there is much more to this story than can be read publicly. If the FSB got involved in everything, then there was a good reason. Did they just decide to be good guys and stop some illegal activity, or they didn't give FSB their share of the cake? I only wonder how the BBC got the audio recordings on which they base this story, again the clumsy job of Russian secret agents?

YoBit is also a Russian based company, but I don't see them having any problems from the Russian authorities. Are they paying for protection, or just not engaging in illegal activities?

[buwaytress]

Actually, I believe WEX as an entity was based in Singapore, just the operators were Russian. This isn't a rogue country case, simply the guys being shady enough as it is. I didn't follow much post BTC-e but there was a lot of shady practices by WEX themselves. They sold Bitcoin vouchers at discount too, if I recall the complaints, so people were of course gaming the system.

Very typically Yobit-ish style of running things with vouchers and redemptions, kind of like BTC-e too;)

Where does FSB fit in all this is likely less to do with the exchange and more to do with the operators. Remember they also wanted Vinnik for themselves.

[anoufal]

Not surprising, because as far as I know Russian hackers are among the most "talented" and many of them work for the FSB.

[audaciousbeing]

Reading news like this gives one a kind of mixed feelings on how the crypto market have turned into and the blame is on the founders of Wex since its alleged, I am sure that the FSB would neither confirm nor deny this report whatsoever but the most difficult that needs understanding is howa business is being carried on without understanding the legal parameters of the juridiction they are operating and how would a business manager whose custody the funds of people scattered across the world would deal with authorities without the presence of a lawyer or advised by a legal practitioner on how to deal with them.

[veleten]

sounds like another "highly likely" story to me
in the meaning of the Solsbury incident where the UK accused Russia of poisoning a long time retired ex-KGB agent , providing zero evidence
same is here , according to the BBC report , the ex owner says that FSB might have taken the funds ....
here is the original article in russian:
https://www.bbc.com/russian/features-50420738
all the proofs - audiotapes that "the source" somehow obtained from the criminal case material and is "80% sure that the voice belongs to Bilyuchenko"
not a huge fan of FSB or Russia, but when you accuse someone , provide concrete evience ,not an audiotape that could be easily fixed

[Harlot]

With all the conspiracy theories revolving around FSB and the Russian President I still don't know what to believe so I still count this news as a rumor rather than something true. Especially the part when they talk about BBC having some tapes yet they don't discuss anything about it, this part alone is just what they want us to see to cause some stir in the news in order to make it hotter/juicier for the audience. If this gained more traction I would expect this kind of news would be played out in a lot of ways and they will recycle this like what they are doing with Bitcoin ETFs and Chinese related news.

[Tylev]

This is a truly sad story. This staggering WEX failure illustrates two big things: One, it is truly dangerous to rely on a centralized exchange especially one that is based in a "rogue" country like Russia where the law is the government and you must comply what authorities are ordering you to otherwise our life can be hinging on it. This is my way of saying that we should never trust any exchange based on Russia or any similar countries. I am not wondering why Binance relocated itself to Malta away from Hong Kong which is now under the China regime. Two, this is clearly a display of the power of the government to confiscate and corrupt anything that is under its control. Remember that "Power tends to corrupt, and absolute power corrupts absolutely." Though this can be the case even in democratically-leaning countries, the difference is that in controlled countries they are not that free to expose the corruptions happening in higher places.

Here you correctly noted that the entire government of Russia is actually fraudulent and gangster. If this is all true, then this is not covered by state banditry, headed by the president. Moreover, everything happens so brazenly and openly, not a single civilized state will allow itself to do this. You just need to conclude that with Russian exchanges and in general with Russian business, it is better not to have any contacts.

[figmentofmyass]

YoBit is also a Russian based company, but I don't see them having any problems from the Russian authorities. Are they paying for protection, or just not engaging in illegal activities?

WEX (and certainly BTC-E) were much bigger, so that might be why. this is also the first we've heard of the russian authorities targeting WEX. so if the FSB is truly coming after russian operators this way, it's possible they shook down yobit and we just don't know about it.

in fact, there were some (unconfirmed) rumors that moscow police arrested yobit's owner last year. https://bitcointalk.org/index.php?topic=3054442.0

[1Referee]

This staggering WEX failure illustrates two big things: One, it is truly dangerous to rely on a centralized exchange especially one that is based in a "rogue" country like Russia where the law is the government and you must comply what authorities are ordering you to otherwise our life can be hinging on it.

Most people's requirements for an exchange is to have it be easy to access, and have a lot of shitcoins listed to trade. In both cases yobit and similar crappy exchanges check these boxes.

On top of that, we have enough historical evidence of failed and "hacked" exchanges to know that people do not learn from what happened in the past. In fact, people still use Bitfinex while they know how shady that exchange is, and the same applies to usdt people do not trust but use anyway. People are literally begging to lose their coins.

It's one thing to be ignorant and make mistakes, but it's completely different when you know how shady a certain exchange is but use it anyway.

[malevolent]

Not surprising, because as far as I know Russian hackers are among the most "talented" and many of them work for the FSB.

This is more about strong-arming someone than hacking them.

Most people's requirements for an exchange is to have it be easy to access, and have a lot of shitcoins listed to trade. In both cases yobit and similar crappy exchanges check these boxes.

On top of that, we have enough historical evidence of failed and "hacked" exchanges to know that people do not learn from what happened in the past. In fact, people still use Bitfinex while they know how shady that exchange is, and the same applies to usdt people do not trust but use anyway. People are literally begging to lose their coins.

It's one thing to be ignorant and make mistakes, but it's completely different when you know how shady a certain exchange is but use it anyway.

If people use them, it typically means there isn't anything as good on the market that will suit their needs. BTC-e/wex were one of the oldest exchanges and they always managed to figure out a way to solve any problems they faced until last year. Whoever lost money will certainly be more careful the next time they decide to keep coins on some exchange (at least that's my hope).

[Slow death]

We are really moving into a deeper hole than I imagined. A good journalist who publishes good news, always puts proof. All I have seen in this article are just theories without any proof, there is at least no photo, audio or eyewitness who says they have proof and is willing to show that proof. this is the level of journalism and news we have in the crypto world

[1Referee]

Whoever lost money will certainly be more careful the next time they decide to keep coins on some exchange (at least that's my hope).

Not really. People generally move to the next exchange with their funds. In fact, there has not been a noteworthy outflow of exchange coins in the last couple of years. Bitcoin's transparent nature makes it easy to follow what exchanges hold in their hot and cold wallets, which means that the evidence we have is indicative of people still making the same mistake over and over again.

Coinbase for example holds more coins on behalf of its users than ever before. It's a shitshow, really. If we add Grayscale and Xapo's funds, they currently sit on ~10% of all the coins that will ever be minted.

[malevolent]

Coinbase for example holds more coins on behalf of its users than ever before.

That's due to the influx of new users, there's no indication that people who lost their fortunes on MyBitcoin, Mt. Gox or Wex aren't more cautious now.

[bbc.reporter]

I will not go into any conspiracy theories (at least not too much), but it seems to me that there is much more to this story than can be read publicly. If the FSB got involved in everything, then there was a good reason. Did they just decide to be good guys and stop some illegal activity, or they didn't give FSB their share of the cake? I only wonder how the BBC got the audio recordings on which they base this story, again the clumsy job of Russian secret agents?

The FSB might also be the exchange's main liquidity provider by sending their dirty money to the exchange for laundering.

I speculate that when WEX have begun having problems on their cashflow or maybe the FSB knew that WEX will be shutdown by regulators, the FSB ordered their money out including everyone's money.

[hello_good_sir]

I will not go into any conspiracy theories (at least not too much), but it seems to me that there is much more to this story than can be read publicly. If the FSB got involved in everything, then there was a good reason. Did they just decide to be good guys and stop some illegal activity, or they didn't give FSB their share of the cake? I only wonder how the BBC got the audio recordings on which they base this story, again the clumsy job of Russian secret agents?

The FSB might also be the exchange's main liquidity provider by sending their dirty money to the exchange for laundering.

I speculate that when WEX have begun having problems on their cashflow or maybe the FSB knew that WEX will be shutdown by regulators, the FSB ordered their money out including everyone's money.

That's my theory with this controversy as well, but how would the WEX have money issues? They had fairly decent volume and looked like they were able to stay in the clear for a fairly long time.

It's very likely the FSB just took WEX's money when they were able to find a way in, there's no doubt that they are very, very interested in closing down another exchange that likely works with the Russian Mafia.

Damn though, Russia is fucking ruthless.