First Bitcoin mixer to be penalized by FinCEN fined $60 million

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Larry Dean Harmon, the owner and operator of coin mixing services Helix and Coin Ninja has been hit with a $60,000,000 civil penalty by the Financial Crimes Enforcement Network (FinCEN) for violating the Bank Secrecy Act (BSA), which is the United States’ key anti-money laundering legislation and which was just used to bring charges against BitMEX’s cofounders.

FinCEN, which can investigate and impose civil penalties on money services businesses and their past and former employees for violations of the Bank Secrecy Act, said that Harmon operated Helix from 2014 to 2017 and Coin Ninja from 2017 to 2020. In the penalty assessment released by FinCEN, Harmon is accused of willfully failing to properly register Helix and Coin Ninja and willfully failing to implement an effective anti-money laundering program within either business.

Perhaps more damningly, Harmon also failed to report suspicious activity including users that had used Helix to obscure purchases of child exploitation material and drugs. FinCEN says it observed 241,594 direct BTC transactions between Helix and 39 illegal darknet marketplaces, not counting indirect transactions.

The $60,000,000 is a big chunk of the maximum allowable by law, $209,144,554. The BSA entitles FinCEN to impose a penalty of $57,317 for each willful violation of the statute’s AML program requirements, $8,457 for each violation of the registration requirements, and a minimum of $57,317 for each failure to report suspicious transactions. To have arrived at $60,000,000 speaks to the scope of Harmon’s unwillingness to operate compliantly and the callousness with which he allowed his websites to be used to facilitate child exploitation, drug trafficking and money laundering. Harmon, Helix and Coin Ninja directly profited from these transactions in taking an admin fee off each attempt to conceal heinous criminal activity using its services.

For Harmon, FinCEN is merely the latest U.S. government body to scrutinize his activities, having been indicted in Washington D.C. in 2019. In that indictment, Harmon is accused of operating Helix as a money laundering business which he advertised on the darknet as a way to conceal transactions from law enforcement, and partnered directly with the AlphaBay drug marketplace to offer Helix’s mixing services to AlphaBay customers.

Like with the founders of BitMEX earlier this month, law enforcement is now looking past the corporate veil and prosecuting and fining the individuals who are committing, facilitating or otherwise aiding the commission of crime within the digital asset industry. While the latest rush of indictments and penalties have covered all manner of digital asset players, this latest fine marks the first time that FinCEN has penalized a BTC mixer. Looking at the scale of illegal transactions that Harmon was able to facilitate using his mixers, it would be no surprise if similar indictments, lawsuits and fines follow. FinCEN’s wording when levying the penalty says as much, making the point that it considers itself bound to investigate and fine ‘money services businesses that wilfully violate the BSA and on current and former employees who willfully participate in such violations.’

Despite the massive fine levied and pending prosecutions on Harmon directly, these enforcement actions likely only represent a small piece of the overall criminality being perpetrated by Helix and other coin mixers. Reading through FinCEN’s penalty assessment is a sobering experience, highlighting the scale of criminal activity being facilitated by mixers such as Helix. Dr. Craig Wright argued in 2019 that coin mixers are operating illegally, and that the liability for this will extend far beyond the corporate entity itself. 

There are plenty more organizations and people behind them who are engaging in the exact kind of behavior Harmon is accused of. BCH even has a mixer of its own in CashShuffle, which operates on much the same basis as Harmon’s Helix in that it entices criminals to use it to launder their tainted money.

Here is Roger Ver demonstrating how to use CashShuffle, and judging by the huge amount of activity that Harmon’s similar service attracted, one can assume that FinCEN and other law enforcement agencies are very eager to look at the kinds of activity being facilitated via BCH and CashShuffle. Helpfully for those agencies, the video is titled ‘Tutorial: How to use CashShuffle to Have Anonymous Bitcoin Cash Transactions by Roger Ver’:

https://twitter.com/BitcoinSV_AUS/status/1318385372422836230

Here is the Roger Ver-run and BCH-affiliated Bitcoin.com promoting the same tutorial on criminal money laundering:

Learn how to shuffle your #BitcoinCash from Roger Ver!

Cash Shuffle allows you to enhance your security when using #BitcoinCash, keeping your transactions anonymous. @Rogerkver walks you through the steps of using @CashShuffle in our newest video.
📺 https://t.co/nanxatevcf pic.twitter.com/zOIpzR2jEu

— Bitcoin.com (@BitcoinCom) July 4, 2019

One does not have to try too hard to imagine these video and tweets appearing in a FinCEN penalty assessment or criminal indictment.

Mining pools, exchanges, and now mixers have all been the subject of criminal investigations, lawsuits and financial penalties in recent months. It is now just a matter of waiting to see which domino is the next to fall in the digital asset ecosystem’s criminal underworld.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.