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Blockchain, cryptocurrencies, and insider stories by TNW.

Corrupt Russian agents arrested over $1M Bitcoin extortion scheme

The FSB has dodgy operatives, apparently

2, russia, Russia bitcoin, bitcoin, survey, blockchain, cryptocurrency, digtial asset

Law enforcers from around the globe seem to finally be getting up to speed with tackling cryptocurrency crimes. But it seems the lure of Bitcoin BTC is still too much for some, even for those that should be protecting citizens from cyber-criminals.

An operation to rid the Russian Federal Security Service (FSB) of corrupt officials has reached a crescendo. Two FSB agents involved in a Bitcoin extortion scam were arrested last week, a local news outlet reports.

Two law enforcement agents, Sergei Belousov and Aleksey Kolbov, are being charged with fraud totaling 65 million rubles ($1 million), according to another report.

The real kicker though, is that the pair in question are anti-fraud agents who are usually responsible for investigating financial crimes, not committing them.

Expoiting their power

The pair were investigating a fraud case against Erast Galumov, the former director of media firm Izvestiya. Galumov was arrested in secret last year whilst his family believed he was away on a business trip.

The perpetrators went on to threaten Galumov into admitting the fraud case against him and blackmailed him for 65 million rubles ($1 million). Galumov was supposedly the figurehead in a 43 million ruble ($675,000) fraud case, however, his legal team have continually denied the claims.

That wasn’t all, the pair also went after Galumov’s son, Alexander Galumov. Kolbov used an alternate identity and contacted Alexander ordering him to leave the country else he too would face similar charges as his father.

Kolbov also demanded 65 million rubles ($1 million) from Alexander Galumov, claiming it was to pay for Galumov’s bail.

Eventually, both Galumov and his son complied with the crooked agents’ demands.  But little did Kolbov and Belousov know, the Galumov’s were working with another branch of the FSB responsible for weeding out bent agents.

After Bitcoin payments were made, investigators were able to trace the funds and link the receiving wallet address to Kolbov, reports state.

Guilty as charged

Both Kolbov and Belousov pleaded guilty, but it is still thought that another 15 agents were involved in this extortion. The case is currently being handed over to the courts to further interrogate and sentence the pair.

Using Bitcoin as a payment method in extortion scams is nothing new.

Last year, an American-Israeli teenager was sentenced to 10 years in prison for sending hoax bomb threats. He threatened to bomb a number of institutions unless they paid a Bitcoin ransom.

Sextortion scams are always doing the rounds, too. Residents of a town in Kansas are some of the latest to report a Bitcoin extortion scam where hackers threaten to leak sensitive information unless victims pay up.

Sadly it’s not the first time a  law enforcement agent has been wooed by Bitcoin. Drug Enforcement Agency operative Carl Force who investigated defunct dark web marketplace Silk Road and Ross Ulbricht for numerous crimes, had been exploiting his position by siphoning off Bitcoin for his own personal riches, Ars Technica reported at the time.

One thing is for sure though, fraud investigators are probably the last people we would expect to be carrying out fraud crimes.

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Published April 23, 2019 — 12:14 UTC