The State of New York has made its first cryptocurrency related conviction for money laundering today.
Mark Sanchez and Callaway Crain, pleaded guilty to charges relating to running controlled substance business that laundered millions of dollars via cryptocurrency and Western Union payments.
Sold through a dark web site called “NextDayGear”, the defendants manufactured, marketed, sold, and shipped a range of products including injectable and oral steroids, Xanax, Valium and Viagra. The site was operational between 2013 and 2018 and more than 10,000 packages are believed to have been shipped across the United States, generating approximately $2.8 million in revenue.
State prosecutors referred to this as the “first conviction for money laundering involving cryptocurrency”, noting that $2.3 million of illicit funds was deposited in crypto. These were then exchanged into fiat via preloaded debit cards and then withdrawn from ATMS across Manhattan and New Jersey. Payments were also made through Western Union and then withdrawn with false identities, but the majority of the money was laundered with crypto.
District Attorney Vance commented: “These defendants raked in crypto and cash worth millions on their full-service website that sold prescription-free counterfeit steroids and other controlled substances to customers in all fifty states.” He added: “Online drug sellers who do business in New York should take note: whether you’re operating in plain sight or in hidden corners of the dark web, my Office has the skills and resources to follow the money, shut down your business, and hold you accountable.”
This use of intermediary crypto wallets to conceal funds has long been a concern for legitimate operators in the crypto-world but it seems that authorities are becoming savvier, quicker. This case, whilst the first of its kind, is one of a number of recent crypto enforcements that have come about as a result of crypto-crimes receiving proper definitions within the American legal system.
On 23 April, a student at the University of Massachusetts was jailed for 10 years after being caught stealing $7.5 million in cryptocurrency. Court documents show that through a SIM-swapping scam, the 21-year-old Joel Ortez transferred millions of dollars from around 40 victimes. He spent the money living the high life, dropping $10,000 in one night in a Los Angeles club, hiring a helicopter to take him to a music festival, and purchasing Gucci clothing.
After several years of not really understanding or knowing how to regulate cryptocurrency, it seems that US lawmakers are gradually beginning to take positive steps. These latest convictions, combined with more stringent regulatory measures are set to not only clamp down on bad actors, but to prevent future crimes from taking place.
A significant boost for the legitimacy of the industry, regulation and increased public confidence is expected to bring much needed stability to the crypto world.