The operator of two crypto mixing and tumbling services that helped dark web users exchange digital currencies if facing the hefty fine of $60 million for violating anti-money laundering laws as enforced by the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
It is the first time in Fin CEN’s history that the government agency has used civil lawsuits to target a crypto operator with monetary penalties.
According to FinCEN guidelines, crypto exchanges are required to register with the agency as part of a well-thought process to facilitate a functional anti-money laundering compliance program. Cryptocurrency platforms are also expected to maintain clear records and reports of user transactions to tackle the problem of crypto service exploitation by dark web criminals.
Importantly, crypto mixers and tumblers fall well within the FinCEN mandate as they are known to facilitate darknet cybercrime by allowing users to hide the source of criminal proceeds from law enforcement discovery.
In a press release, FinCEN reported that the 36-year-old Larry Harmon, founder and primary admin of Helix and Coin Ninja, was penalized for violating the Bank Secrecy Act (BSA) and attached regulations by failing to file suspicious activity reports on crypto activity occurring within dark web platforms.
Specifically, the crypto site operator did not collect and verify customer details as required, including user names, addresses and other personally identifiable information (PII) across more than the 1.2 million transactions that his business facilitated – FinCEN reported that the Helix site exchanged more than $311 million via digital wallets in its lifetime, with at least 356,000 transactions involving the Bitcoin cryptocurrency.
A FinCEN investigation revealed that the defendant operated helix without proper licensing for a period of 3 years, from 2014 to 2017, and later Coin Ninja from 2017 to the year 2020.
All the while, he made sure to delete all records on customer information that were generated through crypto transactions. The fact that his business was used to fund drug traffickers, counterfeiters and fraudsters made him criminally complicit to their activities.
FinCEN’s press release mentioned that Harmon is being prosecuted by a U.S. District Court for attempting to launder money while operating an unsanctioned money transmission business.
A separate press release by the U.S. Department of Justice (DOJ) reported that Harmon is set to be subjected to criminal court proceedings on federal charges relating to money laundering.
The DOJ went further to cite a three-count indictment spelling Harmon’s charges to include money laundering conspiracy, operating a cryptocurrency business without proper licensing, and transmitting money without legal permission.
Apart from the man’s activity with Helix and Coin Ninja, U.S. prosecutors allege that the defendant operated the dark web search engine known as “Grams” to promote the Helix crypto mixing service.
Links to the Now-Defunct AlphaBay Market
A critical assessment by FinCEN discovered that the bulk of Helix dark web-associated transactions were linked to the AlphaBay marketplace, one of the darknet’s largest websites by the time a law enforcement seizure caused its demise in the year 2017.
The agency reflected on a November 2016 incident in which the AlphaBay platform is said to have recommended Helix as a Bitcoin service that can be used by users to eliminate transactional traces on cryptocurrencies on transmission – the traces would have been used by law enforcement agencies to link transactions to the AlphaBay website.
In AlphaBay alone, it is alleged that Helix transactions numbered at 191,988 transactions totaling an excess of $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 tried in France.