The operator of the world's oldest Bitcoin money laundering service faces a 50-year prison sentence after being found guilty in a US court.
Roman Sterlingov, 35, operated Bitcoin Fog, a service used by cybercriminals of various types to hide their digital footprints when using cryptocurrencies as part of their illicit activities.
It worked by sending a number of Bitcoin tokens to Bitcoin Fog, which would then be mixed with other users' funds and returned to the owner in multiple smaller transactions. The service collected a small percentage of the value of each transaction, earning Sterlingov a fortune.
According to the Department of Justice (DoJ), law enforcement previously seized 1,354 Bitcoin that were held in a Bitcoin Fog wallet along with $349,625 in other tokens from the Kraken crypto exchange. The value of Bitcoin stands at just under $100 million, based on the current exchange rate.
Bitcoin Fog was in operation between October 2011 and April 2021 before authorities caught the Russian-Swede and shut down the service. Over its lifetime, authorities say it laundered "more than" 1.2 million Bitcoin tokens, which in their respective values โโin that period amounted to around $400 million in total.
The service dealt with various types of crimes, although it was used largely by clients of dark web markets who purchased illicit goods such as drugs and stolen digital assets. The dark web markets themselves were also direct customers and offered so-called mixing services through their platforms, but they relied on Bitcoin Fog.
The Department of Justice notes that the service was also used by members of Welcome to Video, a South Korean dark website that allowed users to exchange child sexual abuse material (CSAM).
"Roman Sterlingov thought he could use the shadows of the Internet to launder hundreds of millions of dollars in Bitcoin without being caught. But he was wrong." saying Lisa Monaco, Deputy Attorney General.
"Our team of agents, analysts and prosecutors were relentless in their pursuit of justice, painstakingly tracing Bitcoin across the blockchain to hold Sterlingov and his company Bitcoin Fog accountable. Today, a jury returned guilty verdicts in all charges, proving that no matter where you operate, if your cryptocurrency service comes to the United States, you must comply with US law."
Sterlingov was found guilty of one count of money laundering conspiracy and covert money laundering, each of which carries a maximum sentence of 20 years.
He was also found guilty of one count of operating a money transmission business without a license and violations of the D.C. Money Transmitters Act, each of which carries a maximum sentence of five years. Sterlingov will be sentenced on July 15.
What is a Bitcoin mixing service?
Mixing services have been in operation for many years and others like Bitcoin Fog continue to operate today.
After being adopted by cybercriminals, law enforcement quickly became effective at tracking down Bitcoin token owners by analyzing blockchain transactions.
Combining services like Bitcoin Fog made the process much more difficult. Cryptocurrency exchange OKX even says that the pool of funds these services generate is completely untraceable.
"A coin shaker... [mixes] pools cryptocurrency funds from multiple users, creating a pool of funds that is impossible to trace back to its original source," says. "This makes it difficult for anyone (including governments, hackers, and other malicious actors) to trace or identify the parties involved in a transaction.
โAdditionally, coin mixers can provide an additional layer of protection against hacking and theft, as coin mixers make it difficult for attackers to determine the origin of a particular cryptocurrency wallet.โ
Cryptocurrency mixers are not inherently illegal and can operate legally in most jurisdictions as long as they are not used for criminal purposes.
The United States, for example, does not ban mixing services, but requires them to register as money transmitters under the Bank Secrecy Act. Others have been put on sanctions lists so doing business with them is obviously illegal.
According to blockchain data platform Chainalysis, it is not aware of any mixers currently in operation that meet the required criteria to register in the US as a legitimate service.
However, he says that only a small percentage of users of the mixing service do so in connection with nefarious means. Many use them for financial privacy reasons, says, such as people who seek to hide their finances from the oppressive regimes they live under and those who only want to conduct legal transactions anonymously. ยฎ
