BBC Russia reports that Dmitri Vasilev, the former CEO the now non-functional Russian crypto exchange WEX, was arrested on Friday in Italy.
The WEX scam
The problem started when Vasilev decided to sell WEX to Dmitri Khavchenko, a former fighter of the self-proclaimed DNR (Donetsk People’s Republic), nicknamed “Sailor”. A conflict followed between Khavchenko and WEX’s team, where an admin disappeared with the private keys. The admin was anonymous. Subsequently, trading and withdrawal of funds in the exchange stopped.
Western sanctions were also imposed against Khavchenko in connection with the conflict in the Donbas. Khavchenko repeatedly denied links with Wex, the onus falling back on Vasilev. In his defense, Vasilev cites that, Khavchenko has changed the official owner of the Singapore-registered exchange to his daughter, Daria
The Money trail
Coindesk reports that in 2018, almost $19 million worth of Ethereum moved from the exchange’s cold wallets to Binance. Binance CEO CZ froze WEX’s accounts on Binance.
PwC reported that two Iranian citizens, Faramarz Shahi Savandi and Mohammad Mehdi Shah Mansouri, creator of the SamSam ransomware, used WEX to launder over $6 million collected in ransom payments.
A Police application for WEX reads:
I believe that the actions of this site contain elements of a crime under Article 159 of the Criminal Code of the Russian Federation Fraud, that is, theft of someone else’s property or the acquisition of the right to someone else’s property by deception or abuse of trust, and Article 274 of the Criminal Code of the Russian Federation. transmission of computer information and information and telecommunication networks, resulting in major damage.
An investigation was initiated by the police of Tolyatti.
In October 2018, an appeal was made to President Vladimir Putin. The matter was put in the hands of the Central Investigation Department of the Moscow Department of the Ministry of Internal Affairs.
A history of corruption, BTE-e
BTC-e was the largest Russian-language platform operating since 2011. BTC-e faced huge criticisms with Wall Street Journal reporting that “BTC-E appeared in 60 to 70 percent of all criminal cryptocurrency cases through 2016.” In July 2017, operations were suspended and the owner Alexander Vinnik was arrested in Greece.
The exchange was restarted under the Wex.nz brand. Wex.nz was registered in Singapore under Dmitri Vasilev. Site management promised to pay off BTC-e debts. We all now know what happened after that!
We always recommend you to store your crypto in a hardware wallet. Please read our article “What are The Most Secure and Reliable Cryptocurrency Wallets (2019)“.