38-year-old Ohio resident, Larry Harmon, pleaded guilty to charges of laundering $300 million Bitcoin by running a 'mixing' service to hide the source of the cryptocurrency that was used for potentially nefarious purposes on the Darknet. He was operating this service from Belize between 2014 and 2017, where he is also on trial for a $60 million civil monetary penalty suit, said a press release from the Department of Justice.
The Darknet, inaccessible through regular search engines and web browsers, is a collection of websites that provide access to contraband material. From drugs to weapons, hacked customer information to government secrets, the Darknet is home to all sorts of goods and services. Users, as well as sellers of these items and services, enjoy the anonymity that also protects them from law enforcement agencies.
To circumvent, the issue of payments that are usually controlled by central agencies like banks and credit companies, users turned to cryptocurrencies, in the past decade. According to an International Monetary Fund (IMF) report, Bitcoin transactions on the Darknet exceeded $1 billion in 2019. However, as cryptocurrencies use a public ledger of their transactions, it is easy to determine the source of the money, if not the real identity of the person using contraband goods or services.
This is where 'mixers' like Harmon step in. Operating a service called Helix, Harmon mixed up, or 'tumbled' the transactions to hide their source in the public ledger system of Bitcoin. Done for a fee, Harmon advertised his service on a darknet search engine, called "Grams" which was also operated by Harmon, while he was in Belize.
His services found their customers by partnering with Darknet marketplaces such as AlphaBay, Evolution, and Cloud 9, the press release said. In his plea, Harmon confessed that he had 'mixed' over 350,000 Bitcoin, whose market value back then exceeded $300 million. Most of his customers came from these marketplaces and Harmon worked with the administrators of these marketplaces to launder Bitcoin that came from illegal drug trafficking.
“By holding Harmon accountable, the department has disrupted the unlawful money laundering practices of these dangerous criminal enterprises,” said Assistant Attorney General Kenneth A. Polite Jr. Acting U.S. Attorney Channing D. Phillips for the District of Columbia said that criminals may try to hide their identities and launder millions in sales but "the department and its law enforcement partners will shine a light on their activities, dismantle the infrastructure such criminal marketplaces depend on, and prosecute and convict those responsible."
While Harmon's sentence is yet to be decided, he can face up to 20 years of imprisonment, a fine of $500,000 or twice the value of the property involved in the transaction, a term of supervised release of not more than three years, and mandatory restitution, the press release said. In his plea, Harmon has already forfeited 4,400 Bitcoin, valued over $200 million at today's prices, and other properties that were involved in his operations.