The US Department of Justice

Bitcoin Used in Money Laundering Scheme

The US Department of Justice - Money Laundering SchemeBitcoin was used in another widespread criminal scheme. The US Department of Justice announced an indictment about a money laundering scheme which used the darknet and Bitcoin.

“An Ohio man was arrested for his operation of Helix, a Darknet-based cryptocurrency laundering service. 


“In the three-count indictment unsealed Feb. 11 in the District of Columbia, Larry Harmon, 36, of Akron, Ohio, was charged with money laundering conspiracy, operating an unlicensed money transmitting business and conducting money transmission without a D.C. license.

“According to the indictment, Harmon operated Helix from 2014 to 2017.  Helix functioned as a bitcoin ‘mixer’ or ‘tumbler,’ allowing customers, for a fee, to send bitcoin to designated recipients in a manner that was designed to conceal the source or owner of the bitcoin.  Helix was linked to and associated  with ‘Grams,’ a Darknet search engine also run by Harmon.  Harmon advertised Helix to customers on the Darknet as a way to conceal transactions from law enforcement. 

“Helix allegedly laundered hundreds of millions of dollars of illicit narcotics proceeds and other criminal profits for Darknet users around the globe,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime, and that the Department can and will ensure that such crime doesn’t pay.”

The indictment described the scheme further.

“From at least in or about November 2016, Helix partnered with the Darknet market AlphaBay to provide bitcoin money laundering services for AlphaBay customers. AlphaBay was a Darknet market in operation from in or about December 2014 through in or aboui July 2017, when the site was seized by law enforcement. At the time of the seizure, AlphaBay was the largest Darknet marketplace in operation, offering a platform for customers to purchase a variety of illegal drugs. guns, and other illegal goods. In or about November 2016, the AlphaBay website recommended to its customers that they use a bitcoin tumbler service to ‘erase any trace of [their] coins coming from AlphaBay,’ and provided an embedded link to the Tor website for GramsHelix. At all relevant times. including in or about November 2016. both AlphaBay and GramsHelix were accessible via computers in the District of Columbia and elsewhere, and were accessed in the District of Columbia.”

While Bitcoin and other crypto-currencies show a lot of promise and potential, many have also raised alarms that the same things which make them attractive as currencies also make them attractive to criminals.

This scheme, particularly its use of the Darknet, harkens back to the notorious Silk Road.

The Silk Road was run Ross William Ulbricht who opened the Silk Road as an internet marketplace also operating on the Darknet which sold drugs and other illicit goods and services.

Like in this scheme, the Silk Road dealt strictly in Bitcoin.

The reason is what makes law enforcement so concerned with crypto-currency and its use in illegal activities: by using any anonymous distributed ledger for transaction buyers and sellers can make exchanges without any obvious link to the individuals involved.

People can buy and sell drugs over The Silk Road and other such marketplaces while easily hiding their identities.

The same was true in this scheme.

“The perceived anonymity of cryptocurrency and the Darknet may appeal to criminals as a refuge to hide their illicit activity,” said Special Agent in Charge Timothy M. Dunham of the Criminal Division of the FBI Washington Field Office.  “However, as this arrest demonstrates, the FBI and our law enforcement partners are committed to bringing the illegal practices of money launderers and other financial criminals to light and to justice, regardless of whether they are using new technological means to carry out their schemes.”

The Darknet is a part of the internet which uses software to mask who is participating in a similar way to how distributed ledger technology masks the identities of those making crypto-currency transactions.