Gary Harmon, the brother of the man jailed for operating cryptocurrency mixer Helix, was jailed Thursday for stealing bitcoin that his brother's operation had generated while it was subject to forfeiture.
Harmon, 31, of Cleveland, Ohio, was sentenced to four years and three months in prison for using the words seed recovery to recreate his brother's offline cryptocurrency wallet while in the possession of the FBI.
Larry Harmon, Gary's brother, ran the Helix mixer from 2014 to 2017. It had partnered with various dark web marketplaces including AlphaBay, Cloud 9, and Evolution to provide flipping services to their clients.
Flipping or mixing services typically charge a fee to pool large amounts of funds from multiple owners, then "mix" the funds and redistribute them to destination addresses, making it difficult to trace digital currencies back to their original owners.
Prosecutors said that over the course of its operations, Helix moved more than 350,000 bitcoins, representing more than $300 million at the time of the transactions.
Following Larry Harmon's arrest in February 2020, law enforcement seized a variety of assets from him, including a Trezor Model One hardware wallet, which was found magnetically attached to the underside of a table at one of his properties.
Although the cryptocurrency stored on this device was subject to forfeiture in the criminal case, due to "additional security features," the FBI was initially unable to recover the digital assets.
To physically access the hardware, the researchers would have had to connect it to a computer and enter a passcode, but Trezor devices also allow users to create "hidden wallets" that are protected by an additional passphrase, without which no they are not only inaccessible but invisible. in the storage system.
According to court documents, the FBI only learned of these hidden wallets after recovering a spreadsheet from Larry Harmon's Google Drive account that indicated he had more than $56 million in cryptocurrency assets in hidden wallets.
As the FBI attempted to break into the storage device, Gary Harmon, who was not under arrest at the time, effectively recreated the device's bitcoin wallets using the recovery keywords, including all 16 hidden wallets.
Gary Harmon then transferred more than 712 digital currencies, valued at $4.8 million at the time and more than $20 million today, to new wallets. These transfers were observed by law enforcement blockchain monitoring specialists.
According to the US Department of Justice, whoever was behind the transfers "further laundered the proceeds through two online bitcoin mixing services before using the laundered bitcoins to finance large purchases and other expenses."
The FBI conducted a voluntary interview with Harmon at this stage, and he denied any knowledge of the transactions.
However, despite being unemployed and living what court documents describe as "a modest lifestyle" before the bitcoin delisting, shortly thereafter, Harmon "began making thousands of dollars in unexplained cash deposits into their bank accounts."
These purchases included a 2018 Audi S5 luxury car; flights from TapJets, a private charter company that accepts bitcoin as a form of payment; and, on February 12, 2021, more than 16 million dogecoins.
Harmon was arrested on July 28, 2021 at his "luxury condo unit" in Cleveland. He pleaded guilty in January 2023 to wire fraud and obstruction of justice and agreed to seize more than $647.41 in bitcoin, $2.14 in ethereum and $17,404,400.64 in dogecoin.
The US Department of Justice stated that "due to rising market prices, the total value of these forfeited properties exceeds $12 million."
Alexander Martin
Alexander Martin is the UK editor of Recorded Future News. He was previously a technology reporter for Sky News and is also a member of the European Cyber โโConflict Investigation Initiative.
