The founder of Bitcoin Lightning Network wallet DropBit, Larry Harmon, is facing federal charges related to the use of darknet portals to allegedly launder $311 million worth of bitcoin.
According to a report on Cincinnati.com, citing court documents, Harmon is being charged with conspiracy to launder money and operating a money transmitting business that wasn’t licensed by the Financial Crimes Enforcement Network (FinCEN).
Harmon was arrested last week could face 14 to 17 and a half years in prison, and is being held in custody for supposedly being a flight risk given his involvement with cryptocurrencies. Documents reportedly show he was running a darknet portal called Grams, which has been described as the “Google of the dark net.”
Essentially, Grams was a darknet search engine. Harmon reportedly used the now-defunct website to promote a bitcoin mixing service called Helix, which mixed BTC through a CoinJoin transaction to mask the origins of the funds. These transactions have been associated with money laundering and other illicit activities.
Court records show prosecutors said this was a profitable venture, as users likely passed their BTC through Helix before using it on the now-defunct marketplace AlphaBay.
Harmon advertised Helix to customers on the Darknet as a way to conceal transactions from law enforcement.
Helix is said to have laundered “at least 354,469 bitcoins,” worth about $311 million when it was active. It charged a 2.5% fee which means Harmon could’ve allegedly made 8,900 BTC ($90 million at today’s prices) running the service.
Harmon reportedly shut down both Grams and Helix after authorities started cracking down on darknet portals. DeepDotWeb, a website providing a directory of darknet markets and allegedly profiting from them via affiliate links, was shut down in May 2019.
Podcast host Peter McCormack recently spoke to Harmon’s brother, Gary, who revealed DropBit’s assets have been frozen by the FBI, which removed $4,000 worth of Bitcoin from its Lightning Network node.
3/ Larry has been denied bond as he is considered a flight risk even though they have confiscated all his assets.— Peter McCormack (@PeterMcCormack) February 13, 2020
Also, all Coin Ninja assets have been frozen and @garmon2525 believes that the FBI has removed $4k of Bitcoin from their lightning node.
As a result, the app is still running thanks to funding from Harmon’s brother.
Featured image via Pixabay.