They Cannot Remain Anonymous Forever
/4 criminals who used cryptocurrencies to launder money and thought they could get away with it
GUEST BLOGGER
Hallie Ayres
Contributing Writer
When the FBI shut down the infamous darknet black market website Silk Road in 2014, the bureau embarked on investigations to seize bitcoin quantities earned through illegal transactions on the website, later selling those bitcoins for more than $48 million. Silk Road, founded in 2011 by Ross Ulbricht, played host to more than $200 million in cryptocurrency transactions during its online tenure. In 2015, Ulbricht was sentenced to serve a double life imprisonment for drug trafficking, computer hacking and money laundering, but because of the encrypted nature of cryptocurrency transactions, many of the site’s users who profited from the sale of illegal goods remain anonymous and untraceable.
Until now.
It’s been a long time coming…7 years to be exact
According to a November 6 press release from the U.S. Attorney’s Office for the Southern District of New York, another Silk Road criminal is now positioned to face significant time behind bars. In July, Hugh Brian Haney, 61 years old, was arrested on charges of money laundering and making financial transactions with illegally obtained funds. Government agents accused Haney of selling drugs on Silk Road between November 2011 and February 2012, during which Haney accrued a profit of more than $19 million worth of bitcoin. After Haney attempted to exchange that sum for cash in February 2018, the exchange company froze his account, which spawned an investigation that culminated in a search warrant and Haney’s arrest. Federal agents were then able to falsify Haney’s claims to have earned the bitcoin by mining it himself, and they seized the money from his bank account. Since pleading guilty in November, Haney faces up to 30 years in prison, and he is set to be sentenced in February of 2020. Following Haney’s arrest, U.S. Attorney Geoffrey S. Berman told CNBC, “[The] arrest should be a warning to dealers peddling their drugs on the dark web that they cannot remain anonymous forever, especially when attempting to legitimize their illicit proceeds.” Despite the significant length of time between when Haney committed his crime to when he tried to cash in, law enforcement was alerted by the unusual activity, and it was enough to lead them to a successful investigation.
The largest forfeiture of bitcoin in Canada
Haney’s case mirrors similar indictments of other drug dealers who have reveled in the perceived anonymity that cryptocurrency promises. In April, Canadian Supreme Court Justice Jane Kelly ordered the confiscation of about $1.4 million in bitcoin from the 30-year-old Matthew Phan, who had implemented cryptocurrency to encrypt his drug dealings. In December of 2017, Phan pled guilty to the possession of illegal narcotics as well as the attempt to purchase a gun with bitcoin. Phan, who claimed to possess such a large amount in bitcoin because he had been trading in cryptocurrency, will be allowed to withhold about $36,000 since Judge Kelly could not prove that the entirety of his cryptocurrency wealth was related to criminal activity.
The downfall of a fentanyl operation on campus in Texas
More recently, San Antonio resident Alaa Mohammed Allawi was sentenced to 30 years in prison in October. The sentencing came nearly two years after Allawi was arrested for selling around 895,000 self-manufactured pills laced with fentanyl through a darknet website called AlphaBay, which was shut down in 2017. According to the Fort Worth Star-Telegram, Allawi pleaded guilty to “one count of conspiracy to possess with intent to distribute fentanyl resulting in death and serious bodily injury and one count of possessing a firearm in furtherance of a drug trafficking crime and one count of conspiracy to commit money laundering.” The investigation into Allawi was prompted by University of Texas at San Antonio law enforcement officials, who noticed an influx of pills on the university’s campus.
Father-daughter duo laundering from home
Also in October, U.S. District Court Judge Susan Watters sentenced 30-year-old Brittany Nicole Green and her father Gregory Green to a combined eight years in prison for operating a cryptocurrency-based drug dealing business out of their home in Billings, Montana, for at least two years. Customs and Border Patrol officials seized a package containing prescription pills that was on its way to the Greens’ home from Canada, igniting an investigation that led to the convictions. Judge Watters noted that the Greens’ activity remained “easily conducted under the radar of law enforcement” since, as Assistant U.S. Attorney Bryan Dake pointed out, the two convicts “never had to leave [their] home,” due to their use of the postal system and encrypted cryptocurrency.
Cryptocurrencies are growing in popularity as a vehicle for money laundering. It’s vital that fraud examiners understand how these technologies work because it’s more likely than not that they will show up in many of your investigations, if they haven’t already. If you’d like to know more about cryptocurrencies and distributed ledger technologies, our self-study course, Cryptocurrency 101: Distributed Ledger Technology and Blockchain provides you with an overview of essential concepts of these technologies. Demonstrations show the workings of a blockchain, its transactions, blocks and protocols that employ mining.
