Bitcoin & Consequence

What does the FBI takedown of a Russian money-laundering organization mean to Vladimir Putin and the man he helped install as U.S. President?

President Vladimir Putin was angry. He kept a group of his key cabinet ministers up until nearly 1 am on a recent Russian morning to lecture them on the country’s crypto-currency sector.

“I can straight-up tell you the president is completely mad about this,” recalls Deputy Prime Minister Igor Shuvalov. “The most significant issues about growth revolve around the digital economy and technological leadership,” Shuvalov told a bitcoin conference in St. Petersburg.

Putin has reason to be worried. Oligarchs have syphoned $335 Bn out of Russia since 2005. Putin himself is believed to be worth $200 Bn. When you’re stealing that kind of money, you need a fast and effective way to launder it and bitcoin is perfect for that type of money-laundering. The crypto-currency’s anonymity and global reach also makes it ideal for Russia’s interference campaigns in foreign elections.

What does the arrest of a 38-year-old Russian man for laundering $4Bn in Bitcoin mean for Vladimir Putin and the man he helped elect as U.S. President?  
Alexander Vinnik, a 38 year old Russian man, suspected of running a money laundering operation, is escorted by plain-clothes police officers to a court in Thessaloniki, Greece July 26, 2017.

This week, the FBI took down one of Russia’s biggest bitcoin exchanges, BTC-e.

Alexander Vinnick, 38, was arrested in Greece for laundering $4 Bn in dirty money through his bitcoin exchange. $2.2 Bn stolen from the Japanese bitcoin exchange, MtGox, and $1.8 Bn from hackers, drug traffickers and embezzlers. The FBI claims Vinnick is one of the world’s biggest crime dons.

Investigators also seized the exchange’s servers. The data on those servers could provide important evidence linking Russia’s organized crime organizations and the hacking of last year’s U.S. election.

Vinnick’s arrest comes as the U.S. has begun to systematically dismantle Russian organized crime networks around the world. Last week, they shut down dark web AlphaBay and they’ve arrested spam lord Pyotr Levashov, who has been linked to the hacking of the DNC.

Deputy PM says Putin is completely “mad” about this.

As investigators close in on the font of his power, Putin faces a real liquidity crisis.

Soon after that late-night tirade about bitcoin with his ministers, Putin met with Vitalik Buterin, the 23-year-old Russian founder of the world’s second most popular crypto-currency, Etherium, perhaps with an eye to ‘nationalizing’ it.

At the same time, Putin’s state-run Sberbank announced it intends to launch its own national crypto-currency. Sberbank CEO Herman Gref let it be known the new Russian bitcoin will be “the only cryptocurrency freely buyable and sellable in Russia” and will likely operate on its own blockchain, evading international prosecutors.

What does the arrest of a 38-year-old Russian man for laundering $4Bn in Bitcoin mean for Vladimir Putin and the man he helped elect as U.S. President?  
Putin and Trump discussed a joint cyber-security task force at the recent G20 meeting in Germany.

Trump loves bitcoin, too. 

Herman Gref has close ties to President Donald J. Trump. They were introduced to each other at the 2013 Moscow Miss Universe by a Russian oligarch whose deputy offered Donald Trump Jr. dirt on Hillary Clinton in June 2016. Gref and Trump are also both linked to the money-laundering Bank of Cyprus. Perhaps not too coincidentally, the Trump administration has been enthusiastic about introducing bitcoin into the U.S. government bureaucracy.

Russia’s unprecedented cyber attack on the U.S. election in 2016 was a multi-layered campaign which included disinformation, an unexplained server link to Alfa Bank in Trump Tower, hacking DNC servers, voters rolls and voting machine vendors, along with Wikileaks disclosures. (Wikileaks itself was saved by millions of dollars in bitcoin deposits despite an international blockade).

An operation of the scale of Russia’s interference in the 2016 U.S. election is not cheap and requires the very kind of anonymity and global reach crypto-currencies provide. The FBI is now surely following the BTC-e blockchain (bitcoin’s ledger) for links between Russia and the Trump campaign.

In Watergate, investigators followed the money. In Trump-Russia, they follow the bitcoin.


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