How Bitcoin is Used in Money Laundering Cases

 Posted on February 02, 2020 in Uncategorized

There is nothing new or novel about the crime of money laundering. For years, federal authorities have aggressively pursued attempts to conceal the illegal origin of money by those who obtain it. What is new, however, is the use of cryptocurrencies like Bitcoin to facilitate these illegal transactions.

In recent years, Bitcoin has become a popular avenue for money laundering. State and federal authorities appear to be taking steps to pursue those exploiting the anonymous nature of cryptocurrencies for this purpose. In 2019, New York made its first arrests for funneling millions of dollars in illegal steroid sales through Bitcoin before exchanging it for dollars.

What is Bitcoin?

To understand how Bitcoin could be used for money laundering, it is first helpful to understand how Bitcoin operates. Created in 2008 by an unknown person or group of people, Bitcoin rose to prominence as a decentralized digital currency. Transferring Bitcoin can be done using peer-to-peer networks, making the use of intermediaries like banks unnecessary.

The popularity of Bitcoin revolves in large part around its anonymity. Ownership of a Bitcoin wallet can be difficult to determine even for federal authorities. The use of this form of concurrency is slowly being embraced by mainstream outlets, making the conversion of Bitcoin to goods, services, or cash easier than ever.

How Bitcoin is Used in Money Laundering

The use of Bitcoin has quickly become an avenue for money laundering. One estimate suggests more than $2.5 billion was laundered through Bitcoin prior to 2018. There are a number of ways that this laundering can occur. In many cases, an individual will use their ill-gotten cash, purchase goods that are easily transferable, and then sell them with payment to be made in Bitcoin.

This can still leave a paper trail, however, as some Bitcoin wallets hosted on the traditional internet can be tracked by federal authorities. Enter Bitcoin mixers. A Bitcoin mixer allows a person to shift Bitcoin across several anonymous wallets in smaller amounts. These small amounts bounce around wallets within the dark web, making the transactions impossible to trace. These small amounts eventually emerge and land in a different wallet, ready to be used without any paper trail.

Prosecuting Bitcoin Money Laundering

None of this means the federal government is powerless to stop Bitcoin money laundering. In February of 2020, the United States Department of Justice cracked one of these Bitcoin mixing operations that was valued at over $300 million. According to the DOJ, the arrests were related to the laundering of proceeds from an online marketplace known as AlphaBay. This bust – along with news that Secret Service is taking an increased role in policing cryptocurrencies – is evidence that the government intends to aggressively pursue these operations.

If successful, the consequences for anyone convicted could be steep. A conviction for money laundering could lead to a prison term of up to 20 years. Additionally, it could also carry a fine of the greater amount of $500,000 or double the amount that was laundering. This means the Ohio man charged in the AlphaBay case faces a fine of up to $600 million. Getting the best federal crimes defense you can buy may be key to safeguarding your freedom.