Belarusian and Cypriot national has been charged in the US for operating an unlicensed cryptocurrency exchange BTC-e and money laundering conspiracy, according to the Department of Justice (DOJ).
Aliaksandr Klimenka and Alexander Vinnik, allegedly controlled the digital currency exchange BTC-e, with others between 2011 and July 2017.
BTC-e primarily targeted the Russian market but had servers located in the US. The report alleges that the exchange facilitated transactions for cybercriminals globally. BTC-e was allegedly used to facilitate crimes ranging from computer hacking, fraud, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.
Currently being held in custody, Klimenka was arrested in Latvia in December 2023 and made an appearance in San Francisco yesterday. If convicted, Klimenka faces a maximum of 25 years in prison.
The Justice Department’s Office of International Affairs said it worked very closely with the Latvian government to secure the arrest of Klimenka. Allegedly, Klimenka also controlled technology firm Soft-FX, and the financial firm FX Open.
In May 2023, CNN reported that lawyers for Vinnik, the Russian money launderer were actively lobbying for their client to be included in any potential US-Russia prisoner swap for the detained Wall Street Journal reporter Evan Gershkovich. Vinnik was extradited from France to California back in 2022.
No KYC Verification in Place
“Despite doing substantial business in the United States, BTC-e allegedly was not registered as a money services business with the U.S. Department of Treasury, had no anti-money laundering process, no system for appropriate “know your customer” or “KYC” verification, and no anti-money laundering program as required by federal law,” said the DOJ in the announcement.
KYC checks in the US crypto industry refer to the process of verifying the identity of customers to ensure compliance with regulations. This typically involves providing personal information such as name, address, and identification documents like a driver’s license or passport when opening an account on a crypto exchange or platform. KYC helps prevent money laundering, fraud, and other illicit activities in the crypto space.
US Cracking Down on Crypto Exchanges
Lately, the US authorities have been cracking down on illicit activity in cryptocurrency markets, especially exchanges operating in North America that do not follow legal requirements.
Most recently, the U.S. Securities and Exchange Commission (SEC) accused cryptocurrency exchanges Binance and Coinbase for offering unregistered securities to customers among other allegations. Coinbase‘s chief legal officer Paul Grewal criticized the US Government Accountability Office (GAO) following its recent report describing crypto as a tool for foreign entities to evade sanctions.
Both exchanges are in an ongoing legal battle with the SEC.
There is concern being expressed that the push by U.S. lawmakers for stringent regulations in the cryptocurrency industry is driving business overseas, reports Julia Smith from Cryptonews, citing a 2024 market outlook report from ETP provider 21Shares.
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