Law enforcement authorities in the United States have apprehended an individual suspected of laundering a substantial amount of Bitcoin (BTC) through a cryptocurrency mixing service. The suspect, Roman Sterlingov, a dual citizen of Russia and Sweden, was arrested in Los Angeles, California, on April 27 and is facing charges of unlicensed money transmission, money laundering, and transmitting money without a license.
Cryptocurrency mixing services, also referred to as cryptocurrency tumblers, are designed to conceal the origin of potentially traceable or “tainted” cryptocurrency by mixing it with other funds in a shared pool. Sterlingov is accused of operating the Bitcoin Fog darknet money-laundering service, which allowed users to obscure the source of their Bitcoin transactions.
Special agent Devon Beckett from the Internal Revenue Service (IRS) was responsible for investigating Bitcoin Fog and ultimately arresting Sterlingov. According to an affidavit filed in the United States District Court for the District of Columbia, Beckett detailed how Bitcoin Fog’s administrator promoted the service as a means to help users obfuscate the source of their Bitcoin transactions through Twitter and a clearnet website.
Blockchain analysis revealed that over 1.2 million BTC, equivalent to approximately $335.8 million, had been processed through the Bitcoin Fog platform since its inception in October 2011. The investigation also found that a significant amount of Bitcoin sent through Bitcoin Fog originated from darknet markets like Agora, Silk Road 2.0, Silk Road, Evolution, and AlphaBay, which predominantly dealt with illegal narcotics and other illicit goods.
Undercover operations conducted by IRS agents demonstrated the effectiveness of Bitcoin Fog’s mixing service in breaking the traceability of funds in the blockchain. In one instance, funds were released to a user who explicitly stated that the money was derived from illegal drug sales. By analyzing Bitcoin transactions, financial records, internet service provider data, and email correspondence, investigators identified Sterlingov as the primary operator of Bitcoin Fog.
The arrest of Roman Sterlingov signifies a significant development in the crackdown on illicit activities involving cryptocurrencies. The case highlights the challenges faced by law enforcement agencies in tracking and prosecuting individuals who exploit digital assets for illegal purposes.