Moscow-based law firm ZP Legal claims to have identified Russian nationals who received Bitcoin stolen in the 2014 hack of Mt Gox.
Local law enforcement is investigating Alexander Vinnik, the alleged operator of the defunct exchange BTC-e.
ZP Legal says Mt Gox creditors who come forward as potential BTC-e victims may help Russian authorities establish a connection between the exchanges.
To cut a deal with law enforcement, those who benefited from the Mt Gox hack might offer to return funds to the exchange’s creditors, the law firm reckons.
While creditors of the defunct Mt Gox Bitcoin exchange wait for the Japanese courts to resolve the fate of their money, a Moscow-based law firm is proposing a different solution.
According to Mt Gox creditors, ZP Legal contacted them earlier this year, offering an opportunity to recover almost a quarter of the missing 850,000 Bitcoins stolen in the 2014 hack of the exchange. (The coins were worth more than $450 million at the time of the theft and $8.5 billion today.)
ZP Legal estimated 170,000 to 200,000 of these coins, currently worth $1.7 billion to $2 billion, can be recovered by taking legal action against Russian nationals who received the stolen money.
In return for its assistance, the law firm will charge creditors 50 to 75 percent of the recovered sum, as well as an hourly rate. However, ZP Legal says it will only accept payment in the event of a successful recovery.
Alexander Zheleznikov, the managing partner of ZP Legal (ZP stands for Zheleznikov and Partners), said he believed that some of the money stolen from Mt Gox might have ended up on another defunct crypto exchange, BTC-e. In fact, this longstanding claim has been investigated by former Mt Gox user Kim Nilsson and alleged in an order by the U.S. District Court of the Northern District of California.
Following this order, the alleged operator of BTC-e, Russian national Alexander Vinnik, was arrested in July 2017 in Greece and is now facing extradition to the U.S., Russia or France to face trial over money laundering charges.
Zheleznikov believes the criminal case against Vinnik, which Russian authorities are also investigating, can be accelerated if Mt Gox creditors come forward as victims and help law enforcement establish a connection between Mt Gox, BTC-e, and BTC-e’s successor, the also-failed Russian exchange WEX.
“Our plan is to represent the Mt.Gox creditors and help them report to Russian law enforcement so that the investigators could establish the connection between the stolen funds from Mt Gox, the operations of BTC-e and WEX, using Vinnik’s case,” Zheleznikov said. He added:
“If our assumptions of those connections are correct, the [thieves] will ultimately come forward and plead guilty, and to reduce the punishment, they will offer to recover a part of the funds. If they don’t, they will be deemed guilty by law enforcement, and then there will be a chance to sue them for damages based on the criminal case.”
Zheleznikov said his firm reached out to lawyers representing the Mt Gox creditors, and later the creditors themselves, with the help of the Russian embassy in Tokyo. (The embassy did not respond to a request for comment.)
Andy Pag, the founder and former coordinator of the largest group of creditors, Mt. Gox Legal (MGL), said he was first contacted by the firm on Feb. 22, soon after ZP engaged with the Japanese lawyers working on the Mt Gox case.
“Lawyers for ZP held meetings in Tokyo with the creditors, and separately with the Mt. Gox Legal (MGL) insolvency lawyers, MHM Japan, on Feb. 15, 2019. I was the coordinator of MGL at the time so MHM made the introduction,” said Pag, who stepped down from Mt. Gox Legal at the end of March
He went on to add:
“There was a long hiatus after that, but more recently they re-contacted me asking me to help them devise their process for verifying individuals are valid victims of the theft, and a process to reach those individuals.”
According to a creditors’ discussion on a closed forum, ZP Legal claimed to have recovered as much as $1 million of funds on behalf of an unnamed client of the Russian crypto exchange WEX.
Zheleznikov refused to discuss the sum with CoinDesk but confirmed his firm worked with two people whose money was frozen at WEX. ZP Legal started its own investigation and the police started a preliminary investigation, and soon some people reached out to the firm and offered to compensate the WEX users’ losses, he said.
The firm connected the two sides and the next thing Zheleznikov heard was the victims telling him that “the matter was resolved,” he told CoinDesk. He refused to name either of the people involved in that deal.
According to a document shared by Pag, ZP Legal told Mt Gox creditors that through a “close cooperation with law enforcement” it believed it could recover “up to 170,000 – 200,000 BTC.”