Penalty of $60 million for Bitcoin mixer for diverting payments

The Financial Crimes Enforcement Network (FinCEN) fined Larry Dean Harmon $60 million yesterday.

He offered Bitcoin (BTC) mixers for years and would have violated the U.S. Bank Secrecy Act.

Bitcoin minxers

Harmon was sued by the U.S. Department of Justice in February for operating Helix. This was a way to increase Bitcoin’s privacy, a tool that would be especially popular on the Dark Net.

With a mixer, you throw your BTC on top of other people’s, as it were, and mix up the origin. Payments are more difficult to trace back to an identity and origin, so it offers extra privacy.

According to documents published by FinCEN on Monday, they „identified at least 356,000 Bitcoin transactions through Helix between June 2014 and December 2017.

„Mr. Harmon, who was working on Helix and Coin Ninja, operated as a exchange bureau of exchangeable virtual currencies, accepting and sending Bitcoin in different ways.

From June 2014 to December 2017, Helix executed more than 1,225,000 customer transactions. The wallet addresses have sent or received more than $311 million dollars. “

Subsequently, FinCEN has been able to identify at least 356,000 Bitcoin transactions. Harmon offered Helix as a mixer or tumbler, and promoted it on the Dark Web. Later, he also founded Coin Ninja, with whom he did the same as Helix as CEO.
Indictment violates money laundering rules

The charge is that Harmon deliberately violated the rules of the Bank Secrecy Act. He did not register as Money Services Business (MSB) and thereby violated the anti-money laundering rules. He should have reported suspicious activities.

This is the first sanction (a fine of $60 million) that FinCEN imposes on Bitcoin mixers. Harmon’s case is remarkable: it is the first time that the U.S. Department of Justice explicitly calls mixing bitcoin a ‚crime‘.

In addition, FinCEN also claims that „Harmon actively deleted the customer information he collected“, even when in contact with „drug traffickers, counterfeiters and fraudsters“.

Salient detail: Harmon is also founder of Dropbit, a mobile wallet to store and send Bitcoin (BTC). In February we already reported on the arrest of the American.

Industry on edge

While the CFTC put the stock markets on edge after the indictment against BitMEX, it is the FinCEN that puts both feet on the privacy side of Bitcoin.

Europol previously put the privacy wallets Samourai and Wasabi on the list of ‚top threats‘. But there are many more privacy tools and mixers that might get in trouble now. Stephend Palley even calls it the ’sword of Damocles‘ that hangs over the industry.

On the other hand, the banks aren’t such sweethearts either. Leaked documents from the same FinCEN, showed us a few weeks ago that the banks had forwarded $2000 billion in payments. The ING, among others, turned up several times in the investigation.