US Charges Russian Hackers with 2011 Theft of 647,000 Bitcoins Worth $16.7 Bn

Published: 13 June 2023

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Alexey Bilyuchenko and Aleksandr Verner are charged with the 2011 theft of 647,000 Bitcoins, which are worth more than $16 billion today. (Photo: MichaelWuensch, Pixabay, License)

By Henry Pope

The U.S. government charged two Russian nationals Friday in the alleged 2011 theft of 647,000 bitcoins, which in today’s market would net more than US$16 billion.

According to recently unsealed indictments, Alexey Bilyuchenko, 43, and Aleksandr Verner, 29, conspired to launder hundreds of thousands of bitcoin stolen from Mt. Gox, the world’s largest cryptocurrency exchange platform at the time of the heist.

In September 2011, Bilyuchenko, Verner, and their co-conspirators allegedly launched a campaign of hacks against Mt. Gox’s Japan-based servers and gained access to thousands of its clients’ crypto wallets.

For almost three years, the group made out like bandits. Reported losses from the digital vault stand at roughly 647,000 bitcoins, which the conspirators transferred into their personal accounts, investigators said.

So widespread were the thefts that, by the time the dust had settled, they had infiltrated the vast majority of Mt. Gox’s customer accounts. The company ceased all operations in February 2014 once the scandal came to light, then filed for bankruptcy protection before ultimately folding soon after.

Bitcoin’s market price has dramatically risen since the start of the heists. Near the start of 2011, it traded for less than a dollar; at the time of writing, however, its value stands at $25,829.

Those 647,000 Bitcoin today would sell for $16,711,363,000.

As part of their plan to launder their alleged stolen goods, the group provided advertising services to New York-based crypto brokers, dubbed the New York Bitcoin Broker by authorities.

In payment for their services, Bilyuchenko and Verner requested that their clients “make large wire transfers into various offshore bank accounts, including in the names of shell corporations” controlled by the conspirators, investigators said.

This business model allowed the two to launder more than 300,000 of Mt. Gox’s stolen Bitcoin between March 2012 and April 2013.

Bilyuchenko also stands accused of operating an illicit cryptocurrency exchange platform of his own, along with Russian cybercriminal Alexander Vinnik, from 2011 to 2017.

The platform, BTC-e, welcomed an expansive criminal clientele, ranging from hackers to corrupt public officials and narcotics distribution rings, and processed billions of dollars doing so, according to the indictment.

“BTC-e was one of the primary ways by which cyber criminals around the world transferred, laundered, and stored the criminal proceeds of their illegal activities,” the indictment said. “In the years it operated, BTC-e processed several billion dollars’ worth of transactions and served over one million users worldwide.”

Bilyuchenko and his co-conspirators’ efforts not only saw them build one of the world’s largest cryptocurrency exchanges in its own right, but also cement BTC-e as the place to go to hide and launder the proceeds of illicit cyber activity, investigators said.

If convicted on all counts, Bilyuchenko faces a maximum penalty of 45 years in prison, while Verner faces a sentence of up to 20 years.

The U.S. Department of Justice did not comment on their whereabouts; Bilyuchenko was last reported fleeing to Moscow in 2017 after narrowly escaping Greek authorities while on holiday. Verner’s location is unknown.