Today might have been one of the most eventuful days in bitcoinland for older bitcoiners in a very long time. 38 year old Alex Vinnik, who is cofounder of BTC-E a long running and shady bitcoin exchange since 2011 was arrested in Greece and charged with money laundering of an amount around 4 Billion dollars. We always knew BTC-E was doing something shady, but to what extent was not realized until the second part of the information leaked.
It seems like BTC-E was responsible for the hack of competing bitcoin exchange Mt.Gox, which famously went bankrupt and lost tens of millions in customer funds. The reason why this is so important is because it is believed that the 2011 hack was the hack that ultimately made Mt.Gox insolvent in the first place. Around 400k bitcoin had been stolen and Karpeles believed rather than coming clean about the hack, they could run a type of fractional reserve business, which worked until the price skyrocketed in 2013.
At the time the price skyrocketed, karpeles could no longer keep the exchange running on reserve and then there was a type of bank run, which caused the whole system to fail. Many people said they have been slowly compiling information for authorities and even Mark Karpeles who is currently on trial for fraud in Japan, chimed in saying Vinnik was believed to be the main suspect from the start. WizSec did a beautiful breakdown of the situation and have divulged the information they have been keeping secret for some time in this post they made earlier today. (http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html)
As for the BTC-E exchange, things are not looking very good. They are currently in emergency maintenance, but have said they will come back online in a few days. Whether or not this happens is unknown at the moment. There has been a large amount of coins moved that we can trace, so there is a possibility they have been raided and lost a large percentage of funds. I saw many people again losing money and posting about it on reddit today, so I want to stress the importance of not keeping funds on an exchange yet again! If BTC-E was raided, it does not look good for every outcome in the short term for them.
The amount of coins that have been moved is not fully tallied, but it is in the tens and millions of dollars, if not more. There is a real possibility that the government could have seized a large percentage of coins that they believe to be gains from illegal money laundering, which would mean they could confiscate them without having to prove it. Because the United States is the one heading this investigation ( as always), there are a bunch of techniques that can be used in order to seize the funds. They are also looking to extradite Vinnik to stand trial in the United States.
We will know for sure in a few days, but if you had coins in BTC-E, I wouldn’t expect to still have the full amount when they talk about their plan of action when they talk about the full situation. There is also the matter of the other founders and what they will do now. Most people holding admin positions on the site are believed to be Russian residents, so it is possible that they will be unable to be apprehended if they keep their heads low enough. Well have to wait and see how this story further progresses, but I expect it will only get crazier in the future.
Thanks to @Elyaque for the badges