The operator of two of the largest crypto mixing and tumbling services is facing trouble. Both sites help dark-web criminals exchange currencies safely. The man behind the two platforms is looking at a $60 million fine for violating anti money-laundering laws. This has been enforced by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
This is the first time in history something like this happens. Yes, bitcoin mixers have gotten in trouble with the law before but never with FinCEN. This is the first time that the government agency uses a civil lawsuit to target a crypto operators with penalties.
According to FinCEN, cryptocurrency exchanges are required to follow a strict set of guidelines. First of all, registering with the agency as a part of a well though process. This is done to implement a functional anti-money laundering compliance program. Such echanges are also expected to maintain a clear record and reports of user transactions. This is done to tackle the problem of dark-net criminals exploiting cryptocurrency services.
It is also important to note that cryptocurrency mixers and tumblers both fall in the exchange category. Both services are required to comply with the FinCEN legislation. Since it is known that the two services facilitate dark net crime, the operator has been targeted.
FinCEN published a press release on the situation. Larry Harmon is the 36 year old founder of the platforms. The two platforms, Helix and Coin Ninja were penalized for the violation of the Bank Secrecy Act. This combined with the failure to report suspicious activity made the fine a 7 digit number.
The operators of the site failed to collect user data and verify customer details. This is required by law and falls under the KYC and AML regulations. Names, addresses and other personal identifiable information has to be collected from users. It is reported that the platforms facilitated over 1.2 million transactions without any verification. In his lifetime, Helix exchanged more than $300 million via digital wallets. This was done with at least 350,000 transactions, all involving bitcoin.
The investigation carried out by FinCEN revealed a lot of details about the defendant. Helix was being operated without the proper licensing for a period of 3 years. This is between 2014 and 2017. It was found that Coin Ninja was also operated without a proper license.
It was also found that the defendant made sure to hide his tracks too. All the records containing customers information and crypto transaction details were wiped. The fact that his business was used to fund drug traffickers, counterfeiters and fraudsters made him criminally complicit to their activities.
Possibility of Criminal Charges
The press release published by FinCEN mentions that Harmon is also being prosecuted. This is being executed by a U.S. District Court for attempting to money launder money. This was reportedly done while operating an unsanctioned transmission business.
The U.S. Department of Justice also published a press release on Harmon. It was reported that the founder of the exchanges is subject to criminal court proceeding on federal charges. All of the charges are related to money laundering.
The Department of Justice went even further. A three-count indictment spelling Harmon's charges was revealed. Money laundering charges are the first thing on the list. Operating a cryptocurrency business without proper licensing is the second charge targeting Harmon. Finally the transmission of money without legal permission is his last charge.
Apart from the two exchanges, the man is being investigated for more serious criminal activity. Some authorities believe that the "Grams" dark-net search engine was created by the defendant. It is believed that this was done to promote the Helix crypto mixing service.
The Link to AlphaBay
A critical assessment was carried out by FinCEN. It was discovered that most of the dark-net transactions carried out on Helix are linked to AlphaBay. AlphaBay was one of the largest dark-net markets to ever exist. Its demise happened in the 2017 after law enforcement agencies seized its servers.
FinCEN also reflected on another matter regarding the situation. In November of 2016 an incident occurred in which AlphaBay recommended to use Helix. The platform said recommended Helix as a Bitcoin service that can help users hide their tracks. This was recommended to users in order to avoid the law enforcement radar. Helix is now also being investigated for having ties with AlphaBay.
Helix had over 190,000 transactions that came directly from AlphaBay. In total, the platform helped users hide the tracks of over $27 million. Helix was also used in other notable marketplaces, including Dream Market, Valhalla Market, and Wall Street Market.
The agency went further to reveal Helix’s interaction with BTC-e, a crypto exchange whose operator is being prosecuted in France.