FinCEN Fines BTC-e Virtual Currency Exchange $110 Million for Facilitating Ransomware, Dark Net Drug Sales

July 26, 2017

Treasury’s First Action Against a Foreign-Located Money Services Business

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN), working in coordination with the U.S. Attorney’s Office for the Northern District of California, assessed a $110,003,314 civil money penalty today against BTC-e a/k/a Canton Business Corporation (BTC-e) for willfully violating U.S. anti-money laundering (AML) laws. Russian national Alexander Vinnik, one of the operators of BTC-e, was arrested in Greece this week, and FinCEN assessed a $12 million penalty against him for his role in the violations.

BTC-e is an internet-based, foreign-located money transmitter that exchanges fiat currency as well as the convertible virtual currencies Bitcoin, Litecoin, Namecoin, Novacoin, Peercoin, Ethereum, and Dash. It is one of the largest virtual currency exchanges by volume in the world. BTC-e facilitated transactions involving ransomware, computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking.

“We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate U.S. anti-money laundering laws,” said Jamal El-Hindi, Acting Director for FinCEN. “This action should be a strong deterrent to anyone who thinks that they can facilitate ransomware, dark net drug sales, or conduct other illicit activity using encrypted virtual currency. Treasury’s FinCEN team and our law enforcement partners will work with foreign counterparts across the globe to appropriately oversee virtual currency exchangers and administrators who attempt to subvert U.S. law and avoid complying with U.S. AML safeguards.”

FinCEN acted in coordination with law enforcement’s seizure of BTC-e and Vinnik’s arrest. The Internal Revenue Service-Criminal Investigation Division, Federal Bureau of Investigation, United States Secret Service, and Homeland Security Investigations conducted the criminal investigation.

Among other violations, BTC-e failed to obtain required information from customers beyond a username, a password, and an e-mail address. Instead of acting to prevent money laundering, BTC-e and its operators embraced the pervasive criminal activity conducted at the exchange. Users openly and explicitly discussed criminal activity on BTC-e’s user chat. BTC-e’s customer service representatives offered advice on how to process and access money obtained from illegal drug sales on dark net markets like Silk Road, Hansa Market, and AlphaBay.

BTC-e also processed transactions involving funds stolen between 2011 and 2014 from one of the world’s largest bitcoin exchanges, Mt. Gox. BTC-e processed over 300,000 bitcoin in transactions traceable to the theft. FinCEN has also identified at least $3 million of facilitated transactions tied to ransomware attacks such as “Cryptolocker” and “Locky.” Further, BTC-e shared customers and conducted transactions with the now-defunct money laundering website Liberty Reserve. FinCEN previously issued a finding under Section 311 of the USA PATRIOT Act that identified Liberty Reserve as a financial institution of primary money laundering concern.

BTC-e has conducted over $296 million in transactions of bitcoin alone and tens of thousands of transactions in other convertible virtual currencies. The transactions included funds sent from customers located within the United States to recipients who were also located within the United States. BTC-e also concealed its geographic location and its ownership. Regardless of its ownership or location, the company was required to comply with U.S. AML laws and regulations as a foreign-located MSB including AML program, MSB registration, suspicious activity reporting, and recordkeeping requirements. This is the second supervisory enforcement action FinCEN has taken against a business that operates as an exchanger of virtual currency, and the first it has taken against a foreign-located MSB doing business in the United States.


FinCEN’s mission is to safeguard the financial system from illicit use and combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and strategic use of financial authorities.

CONTACT: Steve Hudak 703-905-3770


Former Employee Of Commercial Supply Company Admits Fraud, False Testimony Before Grand Jury

Monday, July 24, 2017

TRENTON, N.J. – A former salesman at Bayway Lumber, a Linden, New Jersey, company that sold commercial and industrial products to numerous public and private entities, today admitted his role in a scheme to defraud customers and lying to a federal grand jury, Acting U.S. Attorney William E. Fitzpatrick announced.

Adam Martignetti, 43, of South River, New Jersey, pleaded guilty before U.S. District Judge Peter G. Sheridan in Trenton federal court to Counts 1 and 6 of an indictment charging him with conspiracy to commit wire fraud and making false declarations before a grand jury.

According to documents filed in this case and statements made in court:

Martignetti admitted that from 2011 through 2013 he conspired with others to defraud certain Bayway Lumber customers by providing free items to customers’ employees and then recouping the cost of the items (plus additional revenue for Bayway Lumber) by overbilling and fraudulently billing the customers. Martignetti also admitted to supplying lower-quality, less expensive plywood to a customer, but charging for the more expensive, higher-quality plywood the customer had ordered.

Martignetti gave a variety of personal items to employees of some of Bayway Lumber’s customers, including Amtrak, the City of Elizabeth, and the Plainfield Board of Education.  These items included a laptop, several iPads, a camera and sound system, patio furniture, and other merchandise. Under the supervision of Robert Dattilo, president and partial owner of Bayway Lumber, Martignetti then overbilled and fraudulently billed those customers. Dattilo kept a running tally of how much Martignetti and others overbilled and fraudulently billed customers, which many at Bayway Lumber referred to as the “Bank,” to ensure that Bayway Lumber recovered the full cost of the free items. Dattilo previously pleaded guilty to conspiracy to commit mail and wire fraud and was sentenced in July 2016 to 48 months in prison and ordered to pay $708,386 in restitution.

Martignetti also conspired to provide one Bayway Lumber customer, Consolidated Edison Co. of New York Inc. (Con Edison), with lower-quality wood than it ordered and paid for. When Con Edison ordered graded plywood, a type of plywood graded by mills that had met a certain set of specifications, Martignetti, at Dattilo’s instruction, routinely sent plywood that was of a lower grade or not graded at all, including “reject” plywood, but charged Con Edison for the higher-quality plywood that it ordered.

Martignetti also pleaded guilty to falsely testifying before a federal grand jury while appearing as a witness under oath in March 2013 that he had never given Bayway Lumber items to City of Elizabeth employees for free, and that Elizabeth was never charged for items that were for Elizabeth employees’ personal use.

The conspiracy to commit wire fraud charge to which Martignetti pleaded guilty carries a maximum penalty of 20 years in prison. The charge of knowingly making false statements before a grand jury guilty carries a maximum penalty of five years in prison. Each count also carries a maximum fine of $250,000 or twice the gross gain or loss associated with the offense, whichever is greatest. Sentencing is scheduled for Sept. 28, 2017.

Acting U.S. Attorney Fitzpatrick credited special agents with the Office of Inspector General, U.S. Department of Housing and Urban Development, under the direction of Special Agent in Charge Christina Scaringi; the Office of Inspector General, Amtrak, under the direction of Special Agent in Charge Michael Waters; and the FBI, under the direction of Special Agent in Charge Timothy Gallagher, with the investigation leading to today’s guilty plea.

The government is represented by Assistant U.S. Attorney Cari Fais of the U.S. Attorney’s Office Special Prosecutions Division, and Assistant U.S. Attorney Barbara R. Llanes, Chief, General Crimes Unit, of the U.S. Attorney’s Criminal Division, in Newark.

Defense Counsel: Michael Armstrong Esq., Willingboro, New Jersey

Former Worksource DeKalb Supervisor Charged with Bribery

Wednesday, July 19, 2017

ATLANTA – Roderick L. Wyatt, 61, of Stone Mountain, Ga., has been charged with accepting bribe payments in exchange for approving the enrollment of almost 20 students to a local college, through a federal workforce program in DeKalb County. The federal indictment alleges that Wyatt agreed to accept payments from the college president for each student sent to the college through Worksource DeKalb, a federally funded program.

“Wyatt allegedly sold his supervisory position with WorkSource DeKalb for cash. In doing so, he allegedly accepted a “bounty” for each student sent to a specific college,” said U. S. Attorney John A. Horn.

“An important mission of the Office of Inspector General is to investigate allegations of fraud relating to Workforce Innovation and Opportunity Act grants issued by the U.S. Department of Labor. We will continue to work with our law enforcement partners to investigate these types of allegations,” said Rafiq Ahmad, Special Agent in Charge, Atlanta Region, U.S. Department of Labor, Office of Inspector General.

Public corruption is the FBI’s top criminal investigative priority because it takes a significant toll on the public’s pocketbooks by siphoning off tax dollars,” said FBI Special Agent in Charge David J. LeValley. “This case is another example of our commitment to combat corruption by investigating public officials who choose to abuse federally funded programs.”

According to United States Attorney Horn, the charges, and other information presented in court: the Workforce Innovation and Opportunity Act is a federal public law designed to improve and modernize America’s workforce development system by providing dislocated and low-income individuals with the skills and education needed to obtain employment and by providing employers with trained and qualified workers to fill employment vacancies.

WorkSource DeKalb (formerly DeKalb Workforce Development) was a DeKalb County department funded exclusively by the federal Workforce Innovation and Opportunity Act. WorkSource DeKalb (“WSD”) served the unemployed and underemployed citizens of DeKalb County by providing work readiness programs, services, and activities necessary to obtain sustainable wages. Using federal funds, WSD paid the cost for unemployed and underemployed individuals to attend pre-screened schools or programs where the individuals gained the technical or vocational skills needed to obtain employment in fields such as nursing, truck driving, or welding. After reviewing the unemployed individuals’ career aspirations and educational interests, WSD staff members recommended the individuals to particular pre-screened schools or programs.

From 2013 to April 2017, Wyatt served as a WSD Employment and Training Supervisor. As a supervisor, Wyatt reviewed and approved the school/program recommendations made by WSD staff members.

In 2014, the president and founder of a pre-screened school that offered its students nursing assistant and medical technician certifications approached Wyatt and offered to pay him for each individual that WSD referred to the College. In 2014 and 2015, Wyatt approved the enrollment of approximately 19 students to the College. The College’s president paid Wyatt $100 for each student approved to attend his school. In total, the College received approximately $82,000 in federal funds under the Workforce Innovation and Opportunity Act. The name of the college has not been identified in the Information or any of the court pleadings.

This case is being investigated by the Department of Labor – Office of the Inspector General and Federal Bureau of Investigation.

Assistant United States Attorney Jeffrey W. Davis and Special Assistant United States Attorney Tyler Man prosecuting the case.

For further information please contact the U.S. Attorney’s Public Affairs Office at or (404) 581-6016. The Internet address for the U.S. Attorney’s Office for the Northern District of Georgia is

Five School Bus Owners Indicted for Bid-Rigging and Fraud Conspiracies at Puerto Rico Public School Bus Auction

A federal grand jury in San Juan, Puerto Rico, returned an indictment against five individuals for participating in bid rigging and fraud conspiracies at an auction for public school bus transportation contracts in Puerto Rico’s Caguas municipality, the Department of Justice announced today.

A seven-count felony indictment was filed yesterday in U.S. District Court of the District of Puerto Rico in San Juan against five bus transportation company owners: Gavino Rivera-Herrera, Luciano Vega-Martínez, Alfonso Gonzales-Nevarez, José L. Arroyo-Quiñones and René Garay-Rodríguez.

Count one charges the bus owners with participating in a conspiracy to rig bids and allocate the market for public school bus transportation services in the Caguas municipality.  The second count charges the bus owners with conspiracy to commit mail fraud and counts three through seven charge the bus owners with committing mail fraud.  According to the indictment, the defendants and others defrauded, and conspired to defraud, the Puerto Rico Department of Education and the Caguas municipality, among others, in order to fraudulently obtain contracts for school bus transportation services.

These charges relate to a 2013 Caguas municipality auction, at which four-year contracts for public school bus transportation were awarded.  The indictment alleges that the defendants participated in the charged offenses from around August 2013 until at least May 2015.

“The defendants are charged with depriving taxpayers, the Municipality of Caguas and the Puerto Rico Department of Education of the benefits of a competitive bidding process for school bus contracts,” said Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division.  “This is unacceptable.  The Division will continue its efforts to protect U.S. citizens across the country and hold accountable those who subvert competition.”

“Today’s case is the latest in our ongoing efforts to investigate and prosecute financial crimes, one of the priorities of the Department of Justice,” said U.S. Attorney Rosa Emilia Rodríguez-Vélez of the District of Puerto Rico.  “These arrests serve as a reminder that federal law enforcement agencies intend to vigorously prosecute those who manipulate the economic system to enrich themselves at the expense of the government.”

“Price fixing victimizes the consumer which in this case are the honest, hardworking and tax paying citizens living in Puerto Rico,” said Special Agent in Charge Carlos Cases of the FBI’s San Juan Division.  “Let there be no doubt, the FBI, along with law enforcement partners, will continue to investigate, charge and prosecute any individuals involved in these type of acts.”

The bus owners are charged with bid rigging and market allocation in violation of the Sherman Act, which carries a maximum sentence of 10 years in prison and a $1 million criminal fine for individuals.  The maximum fine may be increased to twice the gain derived from the crime or twice the loss suffered by the victims of the crime, if either of those amounts is greater than $1 million.  Each count of mail fraud, and conspiracy to commit mail fraud, carries a maximum sentence of 20 years in prison and a $250,000 fine.

This is the first case resulting from an ongoing federal antitrust investigation into price fixing, bid rigging and other anticompetitive conduct in Puerto Rico’s school bus transportation services industry.  This investigation is being conducted by the Antitrust Division’s Washington Criminal I Section, the U.S. Attorney’s Office of the District of Puerto Rico, the FBI’s Puerto Rico Field Office and the U.S. Department of Education Office of Inspector General.  Anyone with information in connection with this investigation is urged to call the Antitrust Division’s Washington Criminal I Section at 202-307-6694, visit or call the FBI’s Puerto Rico Field Office at 787-754-6000.

U.S. Army Sergeant Sentenced to 51 Months in Prison for Taking Bribes While Deployed in Afghanistan

A sergeant with the U.S. Army was sentenced today to 51 months in prison for accepting bribes from Afghan truck drivers at Forward Operating Base (FOB) Gardez in Afghanistan, in exchange for allowing the drivers to take thousands of gallons of fuel from the base for resale on the black market, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Michael J. Moore of the Middle District of Georgia.

James Edward Norris, 41, of Fort Irwin, California, was sentenced by Chief U.S. District Judge Clay D. Land of the Middle District of Georgia, who also ordered Norris to pay $176,100 in restitution and to forfeit two vehicles he purchased with money from the bribery scheme and $70,000 in cash that he received from the scheme.

In connection with his guilty plea, Norris admitted that he conspired with other soldiers stationed at FOB Gardez to solicit and accept approximately $2,000 per day from local Afghan truck drivers in exchange for permitting the truck drivers to take thousands of gallons of fuel from the base.  Norris admitted that he was personally paid a total of $100,000 over the course of the conspiracy.

Norris and the other soldiers shipped the bribe proceeds back to the United States in tough boxes.  Norris admitted that, after returning from deployment, he purchased a 2008 Cadillac Escalade with $31,000 cash derived from the bribery scheme and a custom built 2014 Hardcore Choppers motorcycle with approximately $30,000 in proceeds from the scheme.

Seneca Hampton, another U.S. Army sergeant, pleaded guilty for his role in the scheme on Feb. 10, 2015, and is scheduled to be sentenced on July 28, 2015.  Anthony Tran, a former U.S. Army specialist, was indicted on March 10, 2015, for his alleged role in the scheme and remains pending trial.  The charges contained in an indictment are merely accusations, and a defendant is presumed innocent unless and until proven guilty.

The case is being investigated by the U.S. Army Criminal Investigation Command, the Office of the Special Inspector General for Afghanistan Reconstruction, the Defense Criminal Investigative Service and the Defense Contract Audit Agency’s Investigative Support Division.  The case is being prosecuted by Trial Attorney John Keller of the Criminal Division’s Public Integrity Section.