In a recent victory for the government’s crackdown on crypto mixers and their founders, the founder of Bitcoin Fog, a massive $400 million crypto-mixing service, was found guilty of money laundering in a United States District Court on March 12. Roman Sterlingov, 35, was convicted of money laundering, money laundering conspiracy, operating an unlicensed money-transmitting business, and violations of the D.C. Money Transmitters Act. Sterlingov had consistently claimed throughout the trial that he was only a user of the service, not its operator. His attorney, Tok Ekeland, stated that they will appeal the verdict.
During the trial, evidence was presented showing that Sterlingov had operated Bitcoin Fog from October 2011 to April 2021, providing a money laundering service for criminals seeking to hide their illicit proceeds. The service facilitated the movement of over 1.2 million Bitcoin (BTC), valued at $400 million at the time, with the majority of the cryptocurrency originating from darknet marketplaces associated with narcotics, computer fraud abuse, identity theft, and distribution of child sexual abuse material.
The evidence used to convict Sterlingov revealed that the majority of crypto deposited into his exchange accounts came from Bitcoin clusters linked to Bitcoin Fog. Internal Revenue Service (IRS) Criminal Investigation Chief Jim Lee stated that the defendant had laundered hundreds of millions of illicit funds through Bitcoin Fog in an attempt to conceal their origin. Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division emphasized the department’s commitment to prosecuting those who use technology to hide their crimes, regardless of the sophistication of their schemes.
J.W. Verret, a professional witness in the case, has vowed to assist Sterlingov in his appeal, arguing that the on-chain forensics used to accuse him are flawed. The jury has ordered the forfeiture of assets seized from the crypto mixer, including 1,354 BTC held in a Bitcoin Fog wallet and approximately $350,000 in various cryptocurrencies held in a seized Kraken account.
The most serious charges, money laundering conspiracy and money laundering, carry a maximum sentence of 20 years in prison, while the other two charges carry a maximum sentence of five years. Sentencing is scheduled for July 15.
In related news, another crypto mixer founder, Roman Storm, co-founder of Tornado Cash, is set to face a criminal trial in September. Tornado Cash was sanctioned in August 2022. Storm faces charges of conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business, and conspiracy to violate the International Emergency Economic Powers Act. He has pleaded not guilty to all charges.