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Russia’s Federal Security Service, the FSB, has been linked to the loss of $450 million in funds belonging to clients of the shuttered WEX cryptocurrency exchange.
Damning allegations by WEX cofounder Alexei Bilyuchenko, obtained by the BBC and published on Friday, claim that the platform’s closure at the end of 2018 was a direct result of the appropriation of clients’ funds by the FSB.
The BBC gained access to verified transcripts and audio recordings of the Russian criminal investigation into the WEX exchange.
In his statements, Bilyuchenko said he was forced to hand over information about customers’ digital wallets to unnamed FSB officials, shortly before the exchange ceased operations. This data would have enabled them to seize Bitcoin and other cryptocurrencies worth approximately $450 million at the time.
Pavel Durov, founder of messaging platform Telegram, is among those who are believed to have lost their funds on the exchange.
Bilyuchenko said, in the recordings, that he was told the money would go to the FSB ‘Russia fund.’
Funding for pro-Russian rebels?
The scheme was allegedly spearheaded by Russian billionaire Konstantin Malofeev, the BBC claims. The businessman, who has close ties with the Kremlin, is currently facing US sanctions for funding pro-Russian rebels in Eastern Ukraine.
As per the BBC, Russian publication RBC magazine alleged that Malofeev was behind the sale of WEX, in late 2018, to his associate Dmitry Khavchenko, a Ukrainian entrepreneur and pro-Russia fighter in Eastern Ukraine known as "Sailor."
According to Bilyuchenko’s statements, just prior to the WEX collapse, he was in talks with Malofeev, who was after the database of the exchange’s users. The data was for a new government-friendly crypto exchange named Vladex, the BBC says.
The FSB, Malofeev and Bilyuchenko all declined to comment on the allegations when pressed by the BBC.
Mt. Gox and Fancy Bear links
WEX was previously known as BTC-e, one of the world’s largest cryptocurrency exchanges. It’s thought to have handled more than $9 billion in Bitcoin transactions since its inception in 2011.
It was linked to the infamous Mt. Gox hack, as well as Fancy Bear, the Russian cyber espionage group thought to be behind the hacking of US Democratic Party candidates’ email accounts in the run-up to the 2016 Presidential Election.
BTC-e was shut down in 2017 by the FBI for its alleged involvement in money-laundering activities.
Bilyuchenko was one of its co-founders. After his partner Alexander Vinnik was arrested in Greece in July 2017, he fled to Russia and immediately started WEX, promising to return users’ funds.