Pavel Lerner, a senior leader for cryptocurrency company Exmo Finance, was kidnapped on Dec. 26 as he left work in Kiev, Ukraine. Russian and Ukrainian media were the first to report the kidnapping, saying a group of men wearing balaclavas dragged him into a black Mercedes-Benz.
“This is the first such case in Ukraine linked to bitcoin,” said Anton Gerashchenko, an adviser to interior minister Arsen Avakov.
“He was kidnapped by an armed gang for the purpose of extorting bitcoins.We have operative information that $1m worth of bitcoins was paid.”
It was unclear who paid the ransom. Lerner’s work at Exmo did not involve access to the financial assets of its users, the company said, adding that the platform was operating normally.
According to Ukrainian media reports, Mr Lerner was "thrown out on a motorway" by his abductors, and that "Pavel is currently in a state of major stress, therefore, he will not provide any official comments in the coming days”.
The company emphasised it was back to business as usual, and that Mr Lerner did not have access to any financial assets on the platform and that the case was currently under investigation of the state security authorities.
Exmo Finance, which is registered in the UK with Companies House but also has operations in Ukraine, is one of more than 400 unregulated exchanges that have sprung up across the globe to cater for crypto capital markets. Exmo Finance currently has 94,000 active traders and hosted trading of some $125m worth of bitcoin over the past 24 hours, according to its website.
News of the release came as bitcoin and other cryptocurrencies rebounded after two days of losses partly related to regulators toughening rules on digital currencies in an effort to curb excessive speculation. Many digital currencies surged in value this year.
Cryptocurrencies, which can be converted into real-world money anonymously, have long attracted criminal elements. But soaring prices mean that exchange venues have become an increasingly lucrative target for cyber criminals. The value of bitcoin, the most popular digital currency, has more than tripled in the past three months to trade around $14,750 today.
The kidnapping of Mr Lerner, a Russian citizen, was first reported on Tuesday by local media.
Exmo this week moved to quell concerns that customers’ money was at risk, stating that all users’ funds were “absolutely safe” and that Mr Lerner’s job at Exmo did not “assume access either to storages or any personal data of users”.
Exmo and Mr Lerner could not be reached for comment on Friday.
Ukraine’s National Police has informed the Financial Times that a criminal case had been launched on Tuesday involving the alleged abduction of a foreigner in Kiev’s Obolon district, but would not confirm the identity of the victim.
Separately on Thursday, Exmo said on Twitter that it had been hit by a cyber attack, or a distributed-denial-of-service (DDoS) attack, where trading was affected temporarily.