Bitcoin Forum

WASHINGTON—The Financial Crimes Enforcement Network (FinCEN) has assessed a $60 million civil money penalty against Larry Dean Harmon, the founder, administrator, and primary operator of Helix and Coin Ninja, convertible virtual currency “mixers,” or “tumblers,” for violations of the Bank Secrecy Act (BSA) and its implementing regulations.  

Mr. Harmon operated Helix as an unregistered money services business (MSB) from 2014 to 2017 and Coin Ninja from 2017 to 2020.  Mr. Harmon is currently being prosecuted in the U.S. District Court for the District of Columbia on charges of conspiracy to launder monetary instruments and the operation of an unlicensed money transmitting business in connection with his operation of Helix.

As FinCEN clarified in its 2013 Guidance, exchangers and administrators of convertible virtual currency are money transmitters under the BSA.  As such, they have an obligation to register with FinCEN; to develop, implement, and maintain an anti-money laundering compliance program; and to meet all applicable reporting and recordkeeping requirements.  FinCEN issued further clarification in 2019 that financial institutions that are mixers and tumblers of convertible virtual currency must also meet these same requirements.

Mr. Harmon, doing business as Helix and Coin Ninja, operated as an exchanger of convertible virtual currencies by accepting and transmitting bitcoin through a variety of means.  From June 2014 through December 2017, Helix conducted over 1,225,000 transactions for its customers and was associated with virtual currency wallet addresses that sent or received over $311 million dollars.  FinCEN’s investigation has identified at least 356,000 bitcoin transactions through Helix.  Mr. Harmon operated Helix as a bitcoin mixer, or tumbler, and advertised its services in the darkest spaces of the internet as a way for customers to anonymously pay for things like drugs, guns, and child pornography.  Mr. Harmon subsequently founded, and acted as Chief Executive Officer of, Coin Ninja, which operated as an unregistered MSB and in the same manner as Helix.

FinCEN’s investigation revealed that Mr. Harmon willfully violated the BSA’s registration, program, and reporting requirements by failing to register as a MSB, failing to implement and maintain an effective anti-money laundering program, and failing to report suspicious activities.

Specifically, the investigation demonstrated that Mr. Harmon deliberately disregarded his obligations under the BSA and implemented practices that allowed Helix to circumvent the BSA’s requirements.  This included a failure to collect and verify customer names, addresses, and other identifiers on over 1.2 million transactions.  Harmon, operating through Helix, actively deleted even the minimal customer information he did collect.  The investigation revealed that Mr. Harmon engaged in transactions with narcotics traffickers, counterfeiters and fraudsters, as well as other criminals.  

FinCEN closely coordinated today’s action with the U.S. Department of Justice’s Computer Crimes and Intellectual Property Section, the U.S. Attorney’s Office for the District of Columbia, the Federal Bureau of Investigation, and the Internal Revenue Service Criminal Investigation division.

https://www.fincen.gov/news/news-releases/first-bitcoin-mixer-penalized-fincen-violating-anti-money-laundering-laws

Another point is, there could be bitcoin mixers running in countries which do not extradite, or conform to united states court rulings. These type of FINCEN rulings could hold no weight there. Rogue states like north korea could run as many bitcoin mixers as they desired and the USA probably couldn't do anything about it.

An anonymizing services provider is a money transmitter under FinCEN regulations.  The added feature of concealing the source of the transaction does not change that person’s status under the BSA.  

Mixing Bitcoins that are obtained legally is not a crime but, other than the mathematical exercise, there no real benefit to it.

The legality changes when a mixing service advertises itself as a success method to avoid various anti-money laundering policies via anonymity. This is actively offering a money laundering service.

I was reading the article and thinking about that. Was Coin Ninja operating in the US? If I were the owner of a mixer, I would have it in a tax haven, as many crypto casinos do.

This was supposed to happen since bitcoin mixers are frowned upon by governments and at the same time mixers can be used by anyone as long as they are willing to pay the fee.

I do think that for safety purposes instead of imposing a fine on them , the mixers should be allowed to keep a list of addresses which can only be given to the police in case of absolute emergency. Because sooner or later , the government will for sure come for the mixers, they have to adapt and at the same time they have to take it in that they are being used for illegal activities and such.

So I believe we can reach a common ground , this wouldn't mean we are compromising privacy as long as the mixers keeps it strictly personal ... I do believe this would be needed for sure.

See this one wasn't the fault of the government since they did break the law ... Mixers needs to be extra careful.

From June 2014 through December 2017, Helix conducted over 1,225,000 transactions for its customers and was associated with virtual currency wallet addresses that sent or received over $311 million dollars.

First Bitcoin Mixer Penalized by FinCEN for Violating Anti-Money Laundering Laws

Not many may be aware that proxies, vpns and tor nodes are often run by businesses with connections to intelligence agencies like the FBI, NSA, CIA. Its an industry standard for virtually anything IT related.

The future of other mixer will depend on their ability to hide their servers location (or to make them out of reach for governments that find mixing illegal)

I am not really sure if this was first one. I know many more were taken down, but yes maybe their trial was not finished yet.  But in general, any central point of failure will be abused from Government. Mixers are centralised and easily to be taken down. This was known in 2012 or 2013 or whenever first mixers showed up. Only way to achieve anonymity is by permissions decentralised ledger.

This means any mixer that are operating now are prone to getting penalized and shot down, regardless of what they offer or security they have, people can still use them for money laundering, that is for a simple reason that they don't require a KYC and all transactions are anonymous.

We may witness a transition period where bitcoin mixers gradually adopt KYC checks and engage in other practices to be more compliant with BSA.

Another point is, there could be bitcoin mixers running in countries which do not extradite, or conform to united states court rulings. These type of FINCEN rulings could hold no weight there.

I was reading the article and thinking about that. Was Coin Ninja operating in the US? If I were the owner of a mixer, I would have it in a tax haven, as many crypto casinos do.

Not many may be aware that proxies, vpns and tor nodes are often run by businesses with connections to intelligence agencies like the FBI, NSA, CIA. Its an industry standard for virtually anything IT related.

We may witness a transition period where bitcoin mixers gradually adopt KYC checks and engage in other practices to be more compliant with BSA.

Another point is, there could be bitcoin mixers running in countries which do not extradite, or conform to united states court rulings. These type of FINCEN rulings could hold no weight there. Rogue states like north korea could run as many bitcoin mixers as they desired and the USA probably couldn't do anything about it.

This is true.However,the darkweb still exists...
I wonder why FBI,NSA,CIA didn't simply destroy the darkweb,since they control most of the Tor Nodes,proxies and they can request personal data from the VPN providers?Maybe spying the darkweb is better than destroying it?

Even silkroad was disbanded and they did basically everything right but with one or two mistakes and you could be at the end of the world and they will find you.

The thing about Harmon's Helix mixer is he introduced it as some form of anonymizing payments for criminals to take advantage to which make his service in itself as a form or accessory for the crime being committed, this thing alone will just make them guilty of a crime. For normal mixers who just promotes their mixing service as a way to protect your privacy is something that won't alarm anyone, yes it still might be used by some criminals but it doesn't raise any flags as they aren't really directly connected to any kind of crime. So mixers as a whole might not be affected here. 

I think this point is a bit misleading. VPN's are regularly used to connect to a local network within a company and that type are very unlikely to be of interest to the intelligence agencies. Proxies can also be used for both good and bad. However TOR nodes tend to have a slightly different reputation and are not commonly used in general commercial enterprises. Grouping them all up is a bit unfair. In response to the main piece of news: these bitcoin mixers literally have no other purpose than to disguise the source of funds, which is pretty much the definition of money laundering and it was always going to end up badly for them. Kind of glad that law enforcement have finally taken some action, as it has been going on for years.

Security researcher intercepts embassy passwords from Tor

SEP 10, 2007

A security researcher who collected thousands of sensitive e-mails and passwords from the embassies of countries such as Russia and India blamed systems administrators on Monday for not using encryption to shield their traffic from snooping.

Dan Egerstad, a 21-year-old security researcher, revealed on Monday he was able to capture the information by setting up his own node in a peer-to-peer network used by the embassies to make their Internet traffic anonymous.

https://www.infoworld.com/article/2649832/security-researcher-intercepts-embassy-passwords-from-tor.html

I doubt that. KYC would completely negate the purpose of using a mixer in the first place.

People have been known to receive ads related to topics they mentioned out loud or through texts on phones. Also ads indexed according to items they recently bought in stores. Etc. AFAIK there are extensive networks of data mining which ID people using cookies, email addresses and other seemingly innocuous methods of tracking. Registering an email on a bitcoin faucet or allowing cookie tracking might be considered forms of KYC. A mixer wouldn't necessarily require a full KYC check. It could only need to participate in whatever information gathering networks exist, while disabling anonymizing services.

Specifically, the investigation demonstrated that Mr. Harmon deliberately disregarded his obligations under the BSA and implemented practices that allowed Helix to circumvent the BSA’s requirements. This included a failure to collect and verify customer names, addresses, and other identifiers on over 1.2 million transactions.