The United States Attorney’s Office in Massachusetts filed a civil forfeiture action on Wednesday aimed at returning $2.3 million in cryptocurrency to 37 victims of online scams and fraud. The cryptocurrencies – which includes nearly 300,000 USDC, 1.5 million USDT, 102,000 TRX, 3,000 SOL, and 14,000 ADA – were seized from two Binance accounts in January, following an investigation last spring into a “pig butchering” scam targeting a Massachusetts resident. The victim of the scam was tricked into forking over $400,000 to the scammers, who transferred the funds to other wallets that investigators then connected to funds from the other 36 victims.
The civil forfeiture action is a required step in the forfeiture process that allows third parties to make claims to the property before the funds can eventually be returned to the victims. The USAO’s action closely follows last week’s news that the U.S. Attorney’s Office in Chicago had seized $1.4 million in Tether from an unhosted virtual cryptocurrency wallet tied to a suspected tech support scam targeting the elderly. Tether voluntarily assisted with the recovery of those assets, burning the funds tied to the alleged scammers and reissuing them in other, government-controlled wallets to be returned to the victims.
Verdict and charges
Roman Sterlingov, aged 35, was found guilty in a United States District Court on Tuesday, March 12. The charges against him include money laundering, money laundering conspiracy, operating an unlicensed money-transmitting business, and violations of the D.C. Money Transmitters Act. Sterlingov maintained his innocence throughout the trial, asserting he was merely a service user, not its operator. However, the evidence presented during the trial painted a different picture.
Bitcoin Fog, operated by Sterlingov from October 2011 to April 2021, facilitated the laundering of over 1.2 million Bitcoin (BTC) worth approximately $400 million at the time of the transactions. The majority of these funds were sourced from darknet marketplaces associated with illegal activities such as narcotics trade, computer fraud, identity theft, and the distribution of child sexual abuse material. The service provided a platform for criminals to conceal the origin of their illicit proceeds from law enforcement.
Legal consequences and forfeiture
The conviction carries severe penalties, with the most serious charges of money laundering conspiracy and money laundering sting, each carrying a maximum sentence of 20 years in prison. Additionally, Sterlingov faces charges with a maximum sentence of five years in prison. Sentencing is scheduled for July 15.
Moreover, the jury has ordered the forfeiture of assets seized from Bitcoin Fog, including 1,354 BTC held in a Bitcoin Fog wallet and nearly $350,000 in various cryptocurrencies held in a seized Kraken account.
Roman Sterlingov’s conviction is part of a broader effort by the U.S. government to uncover and prosecute individuals involved in illicit cryptocurrency activities. Another prominent figure in this crackdown is Roman Storm, the co-founder of Tornado Cash, a cryptocurrency mixer.
Storm is set to face trial in September on charges including conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business, and conspiracy to violate the International Emergency Economic Powers Act. Despite these legal challenges, Storm has pleaded not guilty to all charges.