How the Commonwealth Bank helped a Bitcoin fraud suspect accused of laundering billions

Alexander Vinnik is in a world of trouble.

The 40-year-old Russian is inside a jail cell in France, where prosecutors argue he is responsible for a vast criminal enterprise.

His problems do not end there: US prosecutors want to extradite him to face criminal charges, while New Zealand police have frozen $130 million of his assets.

The Australian Federal Police are on his tail too.

That is because Mr Vinnik allegedly transferred nearly $100 million through Australia with the help of the Commonwealth Bank, to potentially launder the proceeds of crime.

A ‘breeding ground’ for hackers, fraudsters and public corruption

Mr Vinnik allegedly operated one of the world’s most popular digital currency exchange sites.

Known as BTC-e, the site allowed users to exchange real currency for Bitcoin.

And it offered members — who traded under pseudonyms like CocaineCowboys, ISIS and hacker4hire — near-total anonymity.

The company behind the website was registered in Seychelles — a known money-laundering haven — where people set up shell companies, and hide behind them to protect their identities.

American prosecutors argue BTC-e was a breeding ground for hackers, fraudsters, identity-theft scams, public corruption and drug trafficking.

But there’s a further twist.

Remember how the Mueller investigation found Russian operatives were responsible for hacking the Democratic National Committee, which led to internal Clinton campaign emails getting leaked two days before the 2016 election? 

Later analysis showed those Russian hackers paid for their operations using BTC-e, the service American prosecutors claim Mr Vinnik controlled.

How the criminal enterprise unravelled

About a month after Donald Trump was elected president, an analyst for the British bank Barclays began looking at the transactions coming in and out of BTC-e.

The analyst was so concerned by what they’d found, the bank sent a Suspicious Activity Report to the US Treasury’s intelligence division.

“BTC-e also has a high volume of dark web and Tor market activity and mixing activity — a service used to mask and hide the ultimate source of Bitcoin to make them harder to trace,” the analyst stated.

Meanwhile, an FBI investigation into the Bitcoin exchange was gathering pace.

On the morning of July 25, 2017, BTC-e users woke up, turned on their computers, and were met with a stark message.

That same day, Mr Vinnik was apprehended by police in Greece, where he was reportedly on a family holiday.

A three-way tug of war

Prosecutors in France, the United States and Russia filed extradition requests, with each jurisdiction pursuing Mr Vinnik for separate charges.

A 20-page US Justice Department indictment alleged he was laundering on a vast scale, with more than $5 billion moving through the website.

But he ended up in Paris.

Where even the reported personal intervention of Russian President Vladimir Putin has not helped him. 

He has withered away on a hunger strike, and according to Russian media, he’s even been the subject of assassination attempts. 

Inside jail, Mr Vinnik has maintained his innocence, telling reporters he only “worked for the company and carried out my duties”.

“It’s not right to blame me for that,” he said.

‘They will kill my wife if I will not return their money’

Meanwhile, some of the BTC-e users who had lost access to their money turned on the middleman — a Russian entrepreneur named Sergey Mayzus.

Mr Mayzus owned an electronic payment provider called MoneyPolo that members had used to transfer money in and out of BTC-e.

Mr Mayzus is a controversial figure himself, accused of hosting other internet scam websites, and allowing potentially dirty money through his business. 

But he maintains he has always acted in accordance with anti-money laundering laws.

Mr Mayzus said after BTC-e was shut down, the criminals who had been using the services demanded their money back from him.

“They started to publish photos of my property, my addresses, photos of my family members, my children, and say that they will kill my child, they will kill my wife if I will not return their money,” he told the ABC.

How almost $100 million of suspect money moved through Australia

The Barclays’ report was leaked as part of the massive trove of secret US Treasury documents known as FINCEN Files.

Suspicious Activity Reports from other banks were also in the leak, each with their own concerns about Mr Vinnik’s companies.

Those reports, as well as other documents Background Briefing has seen, show Mr Vinnik transferred almost $100 million through Australia between 2013 and 2015.

That money was deposited into an Australian company called FX Open AU Pty Ltd.

Mr Mayzus said Mr Vinnik was possibly money laundering.

FX Open is an online foreign exchange broker, meaning its users bet on movements in currency exchange rates.

The company’s headquarters are in Perth, but it is ultimately owned by a company in the Marshall Islands.

Its Australian director, Jafar Calley, confirmed that Mr Vinnik had been a client, but said the accounts involved were frozen.

“We were informed that he was involved in something before any significant activity happened with our company,” he said.

Mr Calley said he had been working with the Australian Federal Police and Interpol.

The ABC has seen transaction records showing how Mr Vinnik deposited around $76 million into the company before later removing more than $20 million 18 months later.

Those payments were processed through the Commonwealth Bank.

Mr Calley said these figures were “wildly inaccurate” and said Mr Vinnik only ever deposited less than $10 million.

CBA should have acted: anti-money laundering expert

Former Australian Federal Police agent John Chevis said Mr Vinnik’s transactions should have aroused suspicion at CBA, and that the bank should have asked more questions about the source of funds.

“You should do it because you have a moral obligation to do it, because you know Seychelles is a high-risk jurisdiction that offers products and services that allow customers to bank anonymously,” he said. 

Despite being registered in Seychelles, Mr Vinnik’s company had a Russian phone number.

A Google search would have revealed it was linked to BTC-e.

Mr Chevis said if the Commonwealth Bank believed the company was, in fact, a shell company, it should have acted.

“The first option is to put a stop on the transaction until enhanced customer due diligence can be undertaken. If no additional information is forthcoming, or if no legitimate source can be established, the transaction should be rejected,” he told the ABC.

But the CBA did not stop the transactions, instead, it allowed the company to move millions of dollars — now suspected to be the proceeds of crime — into Australia.

A CBA spokesman would not comment on the specifics of the case, but said the bank recognised that it plays a critical role in protecting customers and the community from the risks associated with money laundering.

“We are committed to ensuring that we take appropriate steps to identify, mitigate and manage the money laundering and terrorism financing risk that we face in conducting our business,” he said.

NZ’s largest-ever seizure of criminal proceeds linked to Vinnik

An international police investigation into Mr Vinnik’s business dealings continues.

The AFP has declined to comment on the case, citing operational reasons.

Last June, police seized $130 million from a company registered to Mr Vinnik in New Zealand.

“That’s the single-largest criminal proceeds proceeding that we have undertaken here,” said Detective Inspector Craig Hamilton from New Zealand’s Financial Crime Group.

“We have had some big ones, invariably involving offshore offending, but this is our largest single proceeding.”