Anthony Murgio will plead guilty in bitcoin case tied to hacking ring

January 9, 2017

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Anthony Murgio, a Palm Beach Gardens man accused of running an illegal money-exchange business on behalf of the mastermind of an international hacking ring, is expected to plead guilty this morning as part of a plea deal in the case, according to his attorney and court records..

It was not clear what charges Murgio intended to plead guilty to, but the move comes in connection with his indictment on allegations that he operated an unlicensed money-transfer business that used bitcoins, a virtual currency, to launder cash for online criminals, including drug dealers and victims of online extortion schemes.

The expected plea comes less than three weeks after federal prosecutors unveiled a new indictment including additional charges against Murgio and two alleged accomplices.

Murgio, 33, was first indicted in the case in July 2015. In April 2016, the case ensnared his father, Palm Beach County School Board member Mike Murgio, who prosecutors accused of participating with him in a bribery scheme to shield the operations of the bitcoin-exchange business.

The allegations forced the elder Murgio’s resignation from the county school board. He pleaded guilty to lesser charges in October.

But prosecutors said the main actor in the case was Anthony Murgio, a Palm Beach Gardens High School graduate, who they say fell in with a ring of cybercriminals linked to colleagues from his college days at Florida State University.

Late last month, federal prosecutors in New York unveiled a new indictment against Murgio and two alleged accomplices, one that accused them – among other things – of using their bitcoin exchange business to exchange “millions of dollars for Bitcoins on behalf of behalf of customers throughout the United States,” including knowingly facilitating “illegal narcotics transactions at various Darknet websites.”

Attorneys for the three co-defendants had protested the new indictment, saying it came far too close to a trial date scheduled in less than two months.

The new allegations may have prompted Murgio to take a plea deal,  attorneys for his co-defendants said in a court filing on Friday.

“The government ratcheted up the pressure, and Anthony Murgio, who was intent on proceeding to trial, has now pled guilty,” wrote the attorneys for Murgio’s two co-defendants.

The indictment claims that Murgion and accomplice Yuri Lebedev launched a money-exchange company that federal prosecutors say laundered cash for Internet criminals, including online drug dealers, and facilitated online extortion schemes.

The scheme took shape when Murgio, after spending time unemployed and dependent on an allowance from his father, began making trips to Russia and, investigators say, colluding with the man who masterminded the historic hack of JPMorgan Chase in 2014.

Attorneys have scheduled a hearing this morning in New York for Murgio to change his plea. He had previously pleaded not guilty.

The judge in the case on Friday granted Murgio permission to travel from Florida for the hearing.

Brian Klein, Murgio’s attorney, confirmed that the guilty plea would be entered Monday but declined to comment further.

Here’s how the The Palm Beach Post described the case in a story last year:

Long before he came into the sights of federal investigators, Anthony Murgio was a popular, self-styled self-starter. The son of two prominent educators — his mother is former Dreyfoos School of the Arts Principal Amelia Ostrosky — he developed an early interest in coin-collecting and was a wide receiver and sprinter at Palm Beach Gardens High School.

At Florida State University he was elected president of the Phi Sigma Kappa fraternity, which he later bragged he converted from “a no-name fraternity to one of the top fraternities in four years’ time.”

As a college student, Anthony spent time selling Cutco knives door to door, claiming later on his personal website that he made “tons of money for a college kid.”

But he said his life took an even more profitable turn when a frat brother named Joshua Aaron “showed me the ropes to online marketing.”

With Aaron’s guidance, Anthony says he started his own online marketing company. It was, he said, a smashing success. On his website he said that he was soon “flown all over the world, taken out to dinners all day and night.”

He graduated in 2007 with a marketing degree. From online marketing he branched into running eateries and nightspots. He soon was an owner of three Tallahassee venues: the 101 Restaurant, Club Mint and Versailles wine lounge.

In 2010, at age 26, Anthony Murgio was picked by Tallahassee Magazine as one of the “Top Singles of Tallahassee.” He drove a leased 2010 Mercedes Benz E350.

Son’s bankruptcy denied

But whatever his outward signs of success, financial problems soon followed.

In April 2012, he filed for personal bankruptcy. He had been forced to sell off his restaurants, and his online marketing company couldn’t afford to pay its employees, he admitted in a court deposition.

He was broke, he claimed, and dependent on a $2,000-a-month allowance from his parents to make ends meet.

His financial problems were followed by legal ones. His bankruptcy petition was rejected after a judge concluded that he had tried to conceal at least $4,000 a month in income from subleasing condos. Anthony Murgio, the judge later wrote, had “knowingly made false statements under oath.”

In 2013 he was arrested on charges that he withheld $110,000 in sales tax collections from the state and was briefly booked into the Palm Beach County Jail.

If it looked like a long fall from grace, it was only the beginning.

Within a few months he was plotting a new endeavor — one that would ultimately ensnare both him and his father in a massive federal probe.

In July 2013, Anthony registered a company called Collectables Club with the Florida Department of State. As the registered address he put his father’s home, a 4,300-square-foot house on a golf course west of Palm Beach Gardens.

He told banks that processed his transactions that the Collectables Club was a members-only group set up to buy and sell antiques, old coins and sports memorabilia, prosecutors say.

But prosecutors say it was a front company, one to mask the operations of an unlicensed money-transfer company called Coin.mx.

The company’s true purpose, they alleged: exchanging cash for bitcoins, a digital, difficult-to-trace currency.

By then, Anthony Murgio had long been an outspoken supporter of libertarian principles — his Facebook profile includes a photo of him with libertarian icon and former Texas Congressman Ron Paul — and his embrace of bitcoin jibed with his support for commerce unimpeded by government regulation.

‘Founding father’ of Coin.mx

He set up the company’s operations with help from a fellow FSU grad, Yuri Lebedev, who was recruited in September 2013. In an email obtained by the FBI, Lebedev confided that he hoped to be the “founding father and the architect” of Coin.mx’s online operations, and authorities say he worked to obtain Internet servers and programmers for the outfit.

But prosecutors say both men worked for someone else: an Israeli named Gery Shalon, who federal officials allege was the owner of Coin.mx.

By the time the bitcoin operation was running, authorities say Shalon was years into his operating of a sprawling cybercrime ring.

Authorities allege that Shalon’s sprawling network carried out the widely publicized hack of JPMorgan Chase’s customer data in 2014, using it to facilitate a massive “pump-and-dump” scheme to artificially inflate the price of penny stocks and then sell them at high profits.

The precise nature Anthony’s relationship with Shalon is not clear. But an apparent link was Joshua Aaron, Anthony’s old frat brother and former marketing mentor.

Aaron, prosecutors say, was one of Shalon’s co-conspirators in the massive hacking ring. Investigators call him a lead operator of the pump-and-dump scheme that Shalon masterminded, an operation that purportedly earned them millions of dollars. He also provided login credentials to hackers carrying out the attacks, authorities allege.

Years after their days at FSU, Aaron and Anthony Murgio were still close friends, and Anthony acknowledged on his personal website that they continued to collaborate.

Buddies meet in Russia

Last year a social media post showed the old friends meeting again in Russia.

It was an auspicious rendezvous point. The cyberattacks on JPMorgan were believed to have been carried out with help from Russian hackers, and Anthony Murgio’s visits there appeared to coincide with at least two computer breaches linked to Shalon’s ring, Bloomberg News reported last year.

Aaron at that point was deep into his work as Shalon’s front man in the pump-and-dump scheme, prosecutors allege in court records.

Anthony Murgio, prosecutors say, was hard at work for Shalon, too.

Between October 2013 and January 2015, Coin.mx exchanged a total of $1.8 million in cash for bitcoins for tens of thousands of customers under Anthony Murgio’s oversight, authorities allege.

Among the company’s alleged clients: victims of online extortions known as “ransomware,” in which malicious computer software seizes control of a computer and threatens to destroy files unless the owner agrees to pay a ransom.

The ransom is often required to be paid in bitcoins, and prosecutors say Anthony Murgio knowingly provided bitcoins to victims looking to save their computers, facilitating “the transfer of ransom proceeds to the malware operators.”

Though he is accused of trying to shield the company’s transactions from regulators and bank officials, he did little to conceal the company publicly.

On his Facebook page, Anthony Murgio posted news about Coin.mx and alerted friends in February 2014 that he was trying to hire a social media manager for the company.

As Coin.mx began doing hundreds of thousands of dollars in transactions, prosecutors say he and Lebedev searched for a way to conceal the scope of their operation.

Dad had little grasp of bitcoins

For assistance, prosecutors say they turned to Anthony’s father. By then, Mike Murgio was more than a year into his first term on the school board.

Mike Murgio was aware of his son’s bitcoin business, but his attorney says he had little grasp of how the digital currency worked.

As he saw his son increasingly drawn into a trade that took him on overseas trips to meet with mysterious figures, attorney Stuart Kaplan said, Mike Murgio warned his son to be careful.

“There is no doubt that his son developed relationships with some people overseas in Russia who Mike absolutely had no contact with or involvement with,” Kaplan said. “Mike on a number of occasions told Anthony, ‘I hope you know who these people are and what they’re about.’

While the extent of Mike Murgio’s knowledge of the bitcoin outfit is not clear, prosecutors say he helped his son conceal its massive financial transactions by taking control of a small credit union in New Jersey.

Their alleged strategy entailed $150,000 in bribes to a man named Trevon Gross, a pastor who served as chairman of the Helping Other People Excel Federal Credit Union in Jackson, N.J., which catered to low-income residents.

In April 2014, authorities say Mike Murgio negotiated an agreement with Gross that allowed his son to nominate people to the credit union’s board of directors. Payments from Anthony and Lebedev soon followed, they say, and former FSU classmates assumed positions on the board.

Authorities say Anthony Murgio then used the credit union as “a captive bank” to operate Coin.mx.

Want ad for CEO on Facebook

Again, he and his friends did little to conceal their actions. Lebedev posted his role on the bank’s board on his online LinkedIn account, as did at least one other friend of Anthony Murgio.

In October, Anthony Murgio announced on his Facebook page that he was looking for a CEO to appoint.

“Anyone interested in running a credit union in New Jersey?” he asked in the online posting. “We are looking for a CEO.”

Things began unwinding less than a year later.

In July 2015, less than a month after Anthony Murgio posted a photo of himself in Moscow on his Facebook page, he and Lebedev were arrested in Florida in connection with Coin.mx.

Murgio, in the Tampa area at the time, was taken to the Pinellas County Jail, where he stayed for three days before being released on bond.

On the lam in Russia

At the same time, Israeli authorities arrested Shalon and another alleged accomplice. Aaron, said to live in Tel Aviv but traveling in Russia, escaped arrest.

At the time, none of the charges specifically mentioned the JPMorgan hack. But federal authorities made it clear that closing that case was their end-game.

“The next step will be for the FBI to arrest these guys, have them flip and cooperate and maybe start having the conversation about JPMorgan,” a person familiar with the case told The Washington Post in July. “You’re using these charges as a hammer, something to hold over their head.”

In four months’ time, prosecutors decided they had enough evidence to charge Shalon and Aaron in connection with the hack of JPMorgan and several other financial companies and media outlets. Both were hit with the new charges in November, although Aaron remained at large.

Authorities say the hacking ring’s intent was to use banking clients’ email addresses in order to send them spam emails promoting penny stocks. The alleged goal: to find enough buyers to drive up the stocks’ prices, then unload them at large profits.

Hundreds of people involved

The scheme, masterminded by Shalon, also included illegal gambling websites, prosecutors said. All told, hundreds of people were said to be involved.

Though Mike Murgio’s involvement appeared to be limited, prosecutors say it was enough to amount to bribery. He now faces federal charges of making corrupt payments with intent to influence an officer of a financial institution.

Kaplan, his attorney, said his client may be “collateral damage” in the FBI’s attempt to gather more evidence about Shalon.

“Obviously a great way to attempt to put pressure on them is to arrest a loved one and try to see if that’s going to be enough to break them,” said Kaplan, a former FBI agent. “I think that the government will use whatever resources are available and whatever techniques are available to make their case.”

Aaron is at large and believed to be hiding out in Russia. He is on the list of the FBI’s Top 10 most wanted cybercriminals. Mike Murgio, his political career dashed, will travel to New York to appear in court Tuesday.

Anthony Murgio has been out of jail since last summer, when his mother offered her condo as collateral to post his bond.