The founder and operator of some of the first “mixing” services in crypto will have to cough up $60 million to U.S. regulators, even as he faces continued criminal charges.

The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) announced on Monday a $60-million fine fine against Larry Dean Harmon, the man behind Helix and Coin Ninja.

Harmon was arrested in February for operating a stable of tumblers or mixers that Washington, D.C. prosecutors allege constitute unregistered money services businesses. Those charges against him say he laundered over $300 million in Bitcoin.

According to today’s announcement, “FinCEN’s investigation has identified at least 356,000 bitcoin transactions through Helix.”

Mixing services attempt to privatize cryptocurrencies by sending them through a massive series of transactions involving various wallets. The process aims to obscure the origins of coins as well as the entity in control of them when they come out of mixing. Harmon’s mixers were only accessible via the dark web.

FinCEN claims that Harmon deliberately flaunted the provisions of the Bank Secrecy Act, the cornerstone of U.S. anti-money laundering legislation. It was violations of the BSA that led to criminal charges against the executive team of crypto exchange BitMEX earlier this month.

U.S. authorities have been on the prowl for criminal activity based on crypto. The Department of Justice recently released a report that highlighted privacy tokens like Monero as cause for alarm.

Updated: 8-19-2021

Darknet Crypto Mixer Operator Pleads Guilty To Laundering $300M In BTC

The operator of the darknet-based Bitcoin mixing service Helix has pleaded guilty to laundering more than $300,000 million worth of BTC from 2014 to 2017.

Larry Dean Harmon has pleaded guilty to laundering more than $300 million while operating the Darknet-based Bitcoin (BTC) mixing service Helix.

On Thursday, The United States Department of Justice announced that the 38-year-old pleaded guilty to laundering more than 350,000 BTC through Helix from 2014 through 2017.

Bitcoin mixers are used to help people anonymize their Bitcoin. In the past, this has helped people cover their tracks on the Bitcoin ledger since all transactions are recorded and immutable on the blockchain. As a result, mixers have become a go-to place for criminals.

Harmon admitted in court that he knew that users mixed proceeds that were generated through drug trafficking and other various illegal activities. He also wittingly partnered with darknet markets to provide the money laundering services to their users.

In addition to Helix, Harmon operated the darknet search engine Grams, founded the digital asset wallet provider DropBit, and served as the CEO of Coin Ninja — a Bitcoin media site — where Harmon advertised his Bitcoin mixer.

Harmon forfeited more than 4,400 BTC as part of the plea (worth more than $200 million at current prices). The date of Harmon’s sentencing is yet to be determined, with the Ohio native facing up to 20 years in prison plus fines.

During previous court sessions, Harmon had sought to argue that BTC was not money, so he could not be found guilty. His reasoning was that although he did indeed mix Bitcoin through his service, Bitcoin is not money, which would mean that he cannot be charged with money laundering. The presiding Judge Beryl A. Howell, however, rejected that argument.

“The term ‘money’ […], commonly means a medium of exchange, method of payment, or store of value. Bitcoin is these things. Indeed, [Harmon] never disputes that Bitcoin is money as that term is ordinarily used, and he concedes that Bitcoin is a form of currency,” the judge ruled.

Officials long had their sights set on Helix and Harmon, with the U.S. Internal Revenue Service Cybercrimes Unit, Belize Ministry of the Attorney General, Belize National Police Department, and the U.S. Federal Bureau of Investigation having collaborated in the investigation of Harmon and Helix since at least 2014, while the mixer was in operation over the course of several years.

In February 2020, the U.S. Financial Crimes Enforcement Network arrested Harmon for operating his Bitcoin mixer without registering it as a money service business. He was fined a $60-million penalty for the charges.

Acting U.S. Attorney Channing D. Phillips emphasized the role that darknet mixers play in helping criminal actors obscure identity, stating:

“Darknet markets and the dealers who sell opioids and other illegal drugs on them are a growing scourge. They may try to hide their identities and launder millions in sales behind technologies like Helix. But the department and its law enforcement partners will shine a light on their activities.”

Other Bitcoin mixing services have come under fire in recent years amid a flurry of U.S. regulatory action. This past April, the operator of the Bitcoin Fog mixer was arrested in Los Angeles for having laundered roughly $336 million in BTC over 10 years.

Bitcoin Mixing (Helix) CEO Harmon Pleads Guilty To US Money-Laundering Charge

The case may set a precedent for bitcoin mixing services.

Larry Dean Harmon, the jailed former chief of darknet bitcoin mixing service Helix, pleaded guilty to one count of conspiracy to launder monetary instruments on Wednesday in the U.S. District Court for the District of Columbia.

Between July 2014 and December 2017, Helix processed a reported 354,468 BTC for drug vendors on Alphabay and other marketplaces. At the time of transaction, this sum was worth over $311 million. At today’s prices, Helix processed over $16 billion worth of bitcoin.

Harmon was arrested in Ohio in February 2020, and charged with conspiracy to commit money laundering, operating an unlicensed money transmitter business and money transmission without a license. Last October, Harmon was ordered to pay a $60 million civil penalty.

The case against Harmon was the first time the Department of Justice (DOJ) and associated financial watchdogs like the Financial Crimes Enforcement Network (FinCEN) called bitcoin mixing services illegal.

In a press statement after Harmon’s arrest, Assistant Attorney General Brian Benczkowski wrote: “This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime.”

Many in the crypto community have expressed concern that Harmon’s arrest set a precedent where creating a bitcoin mixer is considered unlawful and any service that uses obfuscation tactics to conceal bitcoin’s publicly accessible path could face legal pushback. There are multiple technologies for “mixing” bitcoin payments, however. Some are clearly illegal, but with others, the matter is murky.

While pleading guilty, Harmon’s lawyer clarified that Helix’s double-blind nature meant that Harmon did not know the number or value of the transactions he processed.

The prosecution described Harmon’s plea deal as “lenient” due to an unspecified “cooperation agreement.”

However, Ari Redbord, head of legal and government affairs at TRM Labs, a firm that detects crypto fraud and crime, said Harmon is not getting off lightly.

“Quite the opposite. He pled guilty to the lead charge in the indictment – money laundering conspiracy – which carries a 20-year maximum sentence and his sentencing guideline range is life in prison,” Redbord said. “He now has to provide valuable information to the government in order for them to seek a downward departure from the court. The result makes sense for both sides.”

Harmon, who remains on release pending sentencing, faces a maximum sentence of 20 years in federal prison as well as what his lawyer describes as “a large and lengthy forfeiture agreement.”