A US federal jury has convicted Roman Sterlingov, a Russian-Swedish national, of operating Bitcoin Fog, “the longest-running Bitcoin money laundering service on the darknet,” the Justice Department announced. announcement yesterday.
Sterlingov ran Bitcoin Fog from 2011 to 2021, moving more than 1.2 million bitcoins (about $400 million) before his arrest, the DOJ said. In the press release, Assistant Attorney General Lisa Monaco said the DOJ was “relentless” in its efforts to “thoroughly” trace bitcoin “through the blockchain in order to hold Sterlingov and his Bitcoin Fog business accountable.” “.
“Roman Sterlingov thought he could use the shadows of the Internet to launder hundreds of millions of dollars in bitcoin without getting caught,” Monaco said. “But he was wrong.”
Sterlingov faces a maximum sentence of 20 years in prison each on the money laundering conspiracy and money laundering charges. He was also convicted of “operating an unlicensed money transmitting business and unlicensed money transmitting business in the District of Columbia, each punishable by up to five years in prison,” it said. the DOJ. Sentencing is scheduled for July.
Throughout the trial, Sterlingov maintained his innocence, accusing the United States of relying on “junk science” to trace bitcoin using faulty blockchain analysis techniques, Wired reported.
“I didn’t create Bitcoin Fog,” Sterlingov told Wired in an interview from a Northern Virginia prison, likening his trial to “a Kafkaesque nightmare.”
But the DOJ “produced more than three terabytes of data related to the case,” Wired reported, showing “a trail of financial transactions dating back to 2011 allegedly linking Sterlingov to payments made to register the domain Bitcoinfog.com.” From there, investigators used blockchain analysis to trace bitcoin payments that appeared to be “test transactions” of Bitcoin Fog before the money laundering service launched.
Sterlingov told Wired that he was simply a user of Bitcoin Fog, but had never served as an operator of the service and had never used bitcoins for illegal activities.
Ultimately, “court documents and evidence presented at trial” proved that Sterlingov was the operator of Bitcoin Fog, the DOJ said, running “the longest-running cryptocurrency ‘mixer,’ which has gained “notoriety as a go-to money laundering service for criminals looking for money to hide their illicit proceeds from law enforcement. Investigators have found that the bulk of crypto- currency mixed via Bitcoin Fog “originated from darknet markets and was linked to illegal narcotics, computer crimes, identity theft, and child sexual abuse material.”
Bitcoin Fog launders money by charging fees to mix bitcoins in a pool, redistributing bitcoins in a way that would make it more difficult to trace and link bitcoins to the original source or associate bitcoins with activity illegal, Bleeping Computer explain.
In the DOJ’s announcement, Acting Assistant Attorney General Nicole M. Argentieri said Sterlingov and his clients “believed they could use Bitcoin Fog to conceal these illicit transactions,” but the jury’s guilty verdict shows “that this belief was erroneous”.
Sterlingov’s lawyer, Tor Ekeland, told Ars that Sterlingov was “disappointed” and would appeal, questioning the choice of venue – which Ekeland said could be unconstitutional because the US Constitution requires that all criminal trials federal proceedings take place in the district where the crime took place. …and the DOJ’s tracing techniques.
“I think there are significant issues here related to just tracing and sufficiency of evidence,” Ekeland told Ars.
Ekeland said government trails in 2011 found what they identified as the first deposit in Bitcoin Fog, but many different addresses were involved, and “the only reason” Sterlingov was named is because he was the only one using Know Your Customer. identity verification at the time. Government witnesses, Ekeland said, admitted that this was consistent with him selling Bitcoin or hanging out with the founders of Bitcoin Fog, but no evidence of operating the service.
“Where is any evidence that he is actually operating the site? Because I still haven’t seen it,” Ekeland said.
JW Verret, an associate professor at George Mason University Law School who testified at the trial, was “sitting at the counsel table” when the verdict was read, Verret wrote for CoinTelegraph.
“I felt like I had been punched in the stomach,” Verret wrote. “The only way my brain can process this is to focus on calling strategies.”
Verret testified about how investigators’ techniques linking Sterlingov to Bitcoin Fog were flawed, briefly summarizing his views for CoinTelegraph before concluding that Sterlingov was “an easy mark on which to pin Fog’s operation.”
If the techniques are faulty, it could complicate global investigations. Bleeping Computer noted that around the world, law enforcement is increasingly cracking down on cryptocurrency mixers, including Tornado Cash, ChipMixer, and Blender.io. Due to links to criminal activity, law enforcement also appears to be collaborating more internationally. To arrest and convict Sterlingov, U.S. law enforcement coordinated with Europol and Swedish and Romanian police.
In the DOJ press release, IRS Criminal Investigation Chief Jim Lee said that “IRS special agents are uniquely equipped to follow the complex financial trail left by criminals, and we are committed to hold them responsible for the crimes committed.” And U.S. Attorney for the District of Columbia Matthew Graves has issued a warning to anyone attempting to launder cryptocurrencies through mixers like Bitcoin Fog.
“Darknet criminals should know by now that operations like Bitcoin Fog cannot provide the anonymity of cryptocurrency transactions that they claim they can,” Graves said.