Californian man sentenced to prison for using Bitcoin Laundering the proceeds from an MDMA operation on the Dark Web.
John Khuu of San Francisco in California was sentenced to serve 87 months federal prison for conspiracy to launder money and to run an illegal money-transmitter business.
Texas police claim Khuu’s operation imported MDMA from Germany, sold it in dark web marketplaces, and accepted payment via Bitcoin. Khuu would allegedly then trade the Bitcoin stored in seller accounts for U.S. currency and launder the dirty money through “hundreds of transactions and dozens of financial accounts." In the Northern District of California, the man is charged separately with illegal importation of Schedule I drugs.
Operation Crypto Runner is a long-term investigation conducted by the Department of Justice and U.S. Secret Service in conjunction with the Postal Inspection Service. The operation was announced on November 20, 2022.
The operation played a part in 21 people being arrested in 2022 for acting as "money mules" and helping to launder the proceeds of various crypto scams, including real estate, email, and romance scams. A Montana man, as part of an agency crackdown last month, was also convicted of crypto money laundering.
Crackdown on crypto money laundering
The federal government’s all-encompassing approach in fighting Bitcoin money laundering is not surprising. Chainalysis, a blockchain analytics company, believes that 2024 will likely be the largest year in history in terms of the amount of cryptocurrency money laundering. It is expected to surpass the record from 2023.
The firm thinks that the number would be higher if this included money from drug operations, but said it is harder to track the proceeds of crimes that occur "off chain" and originate in the real world.
The U.S. Treasury’s 2024 Risk Assessment found that while traditional methods of laundering drug money still dominate, the use of cryptography to launder money to launder drugs is increasing in both popularity and sophistication.
Most of these cryptocurrency drug money laundering schemes are becoming more international. The DEA’s most recent National Drug Threat Assessment established how Mexican cartels operating in the U.S. have "mutually profitable partnerships with China-based money laundering organizations to launder drug proceeds and are increasingly using cryptocurrency."
