In a United States District Court on Tuesday, March 12, the founder of Bitcoin Fog, a prominent crypto-mixing service valued at $400 million, was convicted of money laundering. This marks another victory for the government’s ongoing crackdown on crypto mixers and their creators.
The convicted individual, Roman Sterlingov, 35, was found guilty of multiple charges, including money laundering, money laundering conspiracy, operating an unlicensed money-transmitting business, and violations of the D.C. Money Transmitters Act. Throughout the trial, Sterlingov maintained that he was merely a user of the service and not its operator. His attorney, Tok Ekeland, announced plans to appeal the verdict.
Evidence presented during the trial revealed that Sterlingov had been operating Bitcoin Fog from October 2011 to April 2021, offering money laundering services to criminals looking to conceal their illicit proceeds from law enforcement. Over the course of a decade, the service facilitated the movement of more than 1.2 million Bitcoin (BTC), equivalent to $400 million at the time of the transactions. The majority of the cryptocurrency came from darknet marketplaces associated with narcotics, computer fraud abuse, identity theft, and the distribution of child sexual abuse material.
The evidence used to convict Sterlingov demonstrated that a significant portion of the crypto deposited into his exchange accounts was sourced from “Bitcoin clusters” linked to Bitcoin Fog. Jim Lee, the Internal Revenue Service (IRS) Criminal Investigation Chief, stated that the trial evidence clearly demonstrated the defendant’s involvement in laundering hundreds of millions of illicit funds through Bitcoin Fog in an attempt to conceal their origin. Acting Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division emphasized the division’s commitment to prosecuting individuals who employ technology to hide their crimes, regardless of the sophistication of their schemes.
J.W. Verret, an expert witness in the case, has pledged to support Sterlingov’s appeal, arguing that the on-chain forensics used to implicate him are flawed.
As a result of the conviction, the jury has ordered the forfeiture of assets seized from the crypto mixer. This includes 1,354 BTC held in a Bitcoin Fog wallet and nearly $350,000 in various cryptocurrencies held in a seized Kraken account. The most serious charges carry a maximum sentence of 20 years in prison, while the other charges carry a maximum sentence of five years. Sentencing is scheduled for July 15.
In a related development, another crypto mixer founder is expected to face trial later this year. Roman Storm, the co-founder of Tornado Cash, a controversial cryptocurrency mixer that was sanctioned in August 2022, is set to face criminal charges in September. Storm is facing three charges related to conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business, and conspiracy to violate the International Emergency Economic Powers Act. He has pleaded not guilty to all charges.