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Dmitri Vasilev, the former CEO the now defunct crypto exchange WEX, was arrested Friday in Italy, the BBC’s Russian Service reported.
The publication cites Vasilev’s acquaintance and two anonymous investors in WEX who told BBC about the arrest. The attaché of the Russian embassy in Italy, Dmitri Gurin, declined to provide any details, as did the Italian financial police (Guardia de Finanza).
WEX was launched in 2017 as a successor of also defunct exchange BTC-e, whose alleged operator, Alexander Vinnik was arrested in 2017 in Greece and now facing extradition to the U.S., France or Russia.
The year of frozen funds
WEX was launched by Russian citizen Vasilev and operated for a year, until it froze withdrawals in July 2018 and hasn’t restored normal service ever since. The troubles started soon after Vasilev tried to sell WEX to Dmitri Khavchenko, a militia fighter in the war in Eastern Ukraine.
Khavchenko told CoinDesk last year that WEX’s admin (who, like the rest of the support team, was anonymous) didn’t like him as the new owner and disappeared with the keys.
He also said at the time that the purchase deal was complete. Khavchenko later changed the official owner of the Singapore-registered exchange to his daughter, Daria, he also told CoinDesk.
In the meantime, over the summer and fall of 2018, almost $19 million worth of ether moved from the exchange’s cold wallets to the popular crypto exchange Binance.
Responding to the outcry on Twitter, Binance CEO CZ said that WEX’s accounts on Binance had been frozen. The fate of those funds is unclear since then.
Police step in
Users, mostly from Russia and neighboring countries, who were unable to get back their crypto and fiat deposited with WEX, started filing police reports in the fall of 2018. According to BBC, the Kazakhstan national police started a criminal investigation of Vasilev based on one such report, as well as the police of the Russian city of Tolyatti, which started a separate preliminary investigation.
The users even wrote an open letter to Russia’s president Vladimir Putin, asking for justice and their money back, the Russian crypto media site Forklog reported in April. The users were notified that the letter was then passed to Russian police headquarters.
In March of this year, the auditing firm PwC reported that two Iranian citizens, Faramarz Shahi Savandi and Mohammad Mehdi Shah Mansouri, who are said to have created the SamSam ransomware, had been using WEX to launder over $6 million collected in ransom payments.
BTC-e was earlier linked to the theft of bitcoin from the storied crypto exchange Mt.Gox. According to a Wall Street Journal report, “BTC-E appeared in 60 to 70 percent of all criminal cryptocurrency cases through 2016.” Both BTC-e and WEX were slow to introduce know-your-customer procedures and had anonymous support teams.
Image of Dmitrii Vasilev, ex-CEO of the crypto exchange WEX, via YouTube