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Bitcoin Fog founder convicted of money laundering using CoinJoin protocol, Tornado Cash case to be handled similarly?

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Bitcoin Fog founder convicted of money laundering using CoinJoin protocol, Tornado Cash case to be handled similarly?

The latest announcement from the U.S. Department of Justice stated that Roman Sterlingov, the founder of the coin mixing protocol Bitcoin Fog, was convicted of money laundering conspiracy and other charges by a U.S. district court yesterday after undergoing 3 years of arrest and trial processes. On the other hand, the criminal trial of the founder of Tornado Cash is set to take place in September this year.

Bitcoin Fog Founder Convicted of Money Laundering

The Federal Bureau of Investigation (FBI) tweeted yesterday that Roman Sterlingov, the founder of the Bitcoin mixing service Bitcoin Fog, was convicted by a U.S. federal court on Tuesday for conspiracy to launder money, operating an unlicensed money transmitting business, and violating the District of Columbia's Money Transmitter Act.

The tweet stated that Bitcoin Fog, operated by Sterlingov from 2011 to 2021, facilitated the laundering of over 1.2 million bitcoins worth more than $400 million, with a significant portion originating from criminal activities associated with the dark web:

The majority of this cryptocurrency came from the dark web and was associated with illegal drugs, cybercrime, identity theft, and child pornography.

Jim Lee, the director of the Criminal Investigation Division of the Internal Revenue Service (IRS), stated:

Evidence presented at trial showed a direct link between the defendant's personal exchange accounts and Bitcoin Fog, indicating a continued effort to obfuscate the source of funds through that platform.

Sterlingov admitted to using the service himself but denied being an operator of the platform.

However, the judge found him guilty on all four charges, and confiscated 1,354 bitcoins held in the Bitcoin Fog wallet, as well as nearly $350,000 worth of cryptocurrency in a Kraken account.

The most serious money laundering charge could result in a maximum sentence of 20 years in prison, with the final sentencing scheduled for July 15.

This case marks one of the significant convictions involving cryptocurrency mixing services for money laundering, following the Bitfinex money laundering case and the case of Larry Dean Harmon's dark web trading platform.

Prosecutor: Mixing Platforms Do Not Provide Anonymity for Criminal Activities

The District of Columbia prosecutor Matthew M. Graves emphasized:

Criminals should now know that platforms like Bitcoin Fog do not provide the anonymity they seek for their encrypted transactions.

He added, "The United States has the capability and will combat criminal activities conducted in cyberspace using technology."

In response, Sterlingov's lawyer Tor Ekeland stated that they will continue to appeal.

Will Tornado Cash Face Similar Actions?

On a side note, the founder of another mixing service will also stand trial in September this year. Tornado Cash, a prominent mixing service in the current crypto market, was sanctioned by the Office of Foreign Assets Control (OFAC) in August 2022. Its developers, Roman Storm and Alexey Pertsev, have been arrested on suspicion of money laundering.

They have reportedly pleaded not guilty, and whether the preliminary judgment in the Bitcoin Fog case will impact the Tornado Cash case is a subject of interest.

A few days ago, entities like Arbitrum DAO and fundraising platform GoFundMe suspended donations and support for legal fees related to Tornado Cash, citing concerns over potential legal risks.

Concerned about legal repercussions? Arbitrum DAO withdraws over a million dollars in funding for Tornado Cash lawsuit