On March 17, 2017, a Manhattan federal jury convicted Trevon Gross, a pastor, and Yuri Lebedev, a software engineer, of bribery and of conspiring to operate bitcoin exchange Coin.mx as an unlawful money transmitting business. The jury also convicted Lebedev of fraud. Sentencing is scheduled for July 2017.
Lebedev and Coin.mx operator Anthony Murgio were charged in 2015. Coin.mx allegedly operated as a conduit for cybercrime-related funds, and in violation of state and federal money transmitting laws. Prosecutors argued to the jury that Murgio and Lebedev sought to trick the financial institutions through which Coin.mx processed transactions into believing its unlawful bitcoin exchange business was simply a members-only “collectibles club.” Part of the Coin.mx scheme included processing and profiting from bitcoin transactions conducted on behalf of victims of ransomware attacks by allowing the victims to buy bitcoins to pay ransom payments while generating revenue for Coin.mx. Murgio pleaded guilty before trial.
Gross and Lebedev were convicted of conspiring with Murgio and others to allow Coin.mx to operate a credit union controlled by the pastor so that Murgio and others could launder bitcoins and evade scrutiny of Coin.mx’s activities by the financial institutions that processed its payments. The trial court had previously ruled that bitcoin qualifies as “funds” under the federal law prohibiting the operation of unlicensed money transmitting businesses.
Coin.mx has been connected to a string of cybercrimes, including the historic 2014 hack at JPMorgan Chase, which exposed the personal data of millions of customers. Former Coin.mx owner Gery Shalon and two other men were charged in indictments alleging not only the operation of Coin.mx, but also that they ran a global cybercriminal enterprise which included money laundering, fraud, unlawful online gambling, securities market manipulation, and identity theft through network intrusions of financial institutions. All three men have pled not guilty, and their case is pending in New York federal court.
These prosecutions demonstrate prosecutors’ growing interest in virtual currencies. They are applying aggressive investigative techniques developed and sharpened in the spheres of organized crime and political corruption, and adapting those techniques for use in the brave new world of FinTech.