Roman Sterlingov, the founder of Bitcoin Fog, a bitcoin mixing service, is at the center of a legal battle following his conviction on multiple charges related to money laundering.
Sterlingov, a dual Russian-Swedish national, faces a potential 30-year prison sentence, a penalty that he and his defense team argue is unjust and excessive.
In March 2024, Sterlingov was convicted by a federal jury in Washington, D.C., of several serious charges, including money laundering conspiracy, operating an unlicensed money transmitting business, and transmitting money without a license.
The charges stem from his operation of Bitcoin Fog, a bitcoin mixing service that authorities allege facilitated the laundering of over $400 million in bitcoin from 2011 to 2021.
Bitcoin Fog operated by mixing various transactions together, making it difficult to trace the origin of funds. While bitcoin mixers can be used for legitimate privacy purposes, prosecutors argue that Bitcoin Fog primarily catered to criminals.
Related: The Ethics Of Mixing Bitcoin
According to the Department of Justice (DOJ), the service was widely used to conceal the proceeds of illegal activities such as drug trafficking, identity theft, and even the distribution of child sexual abuse material. Following Sterlingov’s conviction, Deputy Attorney General Lisa Monaco stated:
“Roman Sterlingov thought he could use the shadows of the internet to launder hundreds of millions of dollars in bitcoin without getting caught. But he was wrong.”
This sentiment was echoed by FBI Deputy Director Paul Abbate, who praised the collaborative efforts of international law enforcement in bringing Sterlingov to justice.
He said, “Today’s conviction is the result of close collaboration between the FBI and our federal and international partners to impose consequences on Bitcoin Fog and its operator for their money laundering activities.”
The severity of Sterlingov’s potential sentence has sparked significant debate.
Federal prosecutors have recommended a 30-year prison term for Sterlingov, which they argue is already a downward departure from the life sentence that sentencing guidelines would typically recommend.
In addition, they are seeking a $100,000 fine and the forfeiture of 1,354 bitcoin, currently valued at millions of dollars, that have remained in a Bitcoin Fog wallet since 2012.
Prosecutors paint a picture of Sterlingov as a central figure in a sophisticated and large-scale money laundering operation. They allege that he not only created and operated Bitcoin Fog but also profited from the illicit activities it facilitated.
“Bitcoin Fog was in the business of laundering money,” prosecutors stated in their sentencing memorandum, further accusing Sterlingov of perjury during the trial.
They pointed out that crucial pieces of evidence, such as the Bitcoin Fog server, server logs, private keys, or any ledger, were never presented during the trial. This lack of direct evidence, they argue, raises significant doubts about the extent of Sterlingov’s involvement in Bitcoin Fog’s operations.
The defense, however, contends that Sterlingov did not personally profit from the transactions processed through Bitcoin Fog. They argue that the sentencing guidelines, which heavily focus on the value of the laundered funds, do not accurately reflect Sterlingov’s culpability.
According to them, the guidelines fail to account for the fact that many of the funds passed through Bitcoin Fog without Sterlingov’s direct involvement.
Sterlingov’s defense also highlighted his personal history and character in their plea for a lighter sentence. They described him as a man dedicated to his family and friends, emphasizing his lack of prior criminal history and his otherwise exemplary life.
The defense memo argued:
“A far lower sentence – informed by Mr. Sterlingov’s future, past and unselfish commitment to the wellbeing of his family and friends – is […] appropriate.”
They suggest that Sterlingov’s role in Bitcoin Fog may have been less central than the prosecution claims and that his actions align more with aiding and abetting rather than directly running the service. This distinction, they argue, should be reflected in a much lighter sentence.
Sterlingov’s case is unfolding against a backdrop of increasing legal scrutiny of bitcoin mixers, which have become a focus for law enforcement agencies worldwide.
These services, designed to enhance the privacy of Bitcoin transactions, have been under fire for their potential to facilitate illegal activities.
The U.S. Treasury Department, for example, has sanctioned certain mixers, and several high-profile cases involving these mixers are currently in progress.
One such case involves Tornado Cash, another digital asset mixer. Roman Storm, the co-founder of Tornado Cash, is facing criminal charges in the United States and is scheduled to go to trial in December.
Another developer associated with Tornado Cash, Alexey Pertsev, was recently sentenced to five years in prison for money laundering charges, a decision he is currently appealing.
These cases, including Sterlingov’s, underscore the growing tension between the need for privacy in Bitcoin transactions and the potential for these technologies to be used for criminal purposes.
The outcomes of these cases could significantly shape how authorities approach and regulate bitcoin mixers in the future.
