Bitcoin Fog Operator Challenges “Excessive” $395M Crypto Forfeiture Request in Money Laundering Case

News | July 5, 2024 By:

On Friday, June 21, 2024, Roman Sterlingov filed a memorandum in opposition to the government’s motion for a preliminary order of forfeiture in his criminal case. Sterlingov has been convicted of money laundering and operating an unlicensed money-transmitting business in connection with his role in operating a cryptocurrency mixing service called Bitcoin Fog between 2011 and 2021.

In the memorandum, Sterlingov argued that the $395 million forfeiture amount sought by prosecutors is excessively disproportionate and violates the Eighth Amendment prohibition against excessive fines. If ordered, it would represent one of the largest criminal forfeiture judgments in U.S. history. However, Sterlingov’s lawyers claim there is no evidence he personally received more than $12 million in fees from operating the mixing service over a decade.

Cryptocurrency mixing or churning services like Bitcoin Fog allow users to obfuscate the transaction history of cryptocurrencies like Bitcoin, improving financial privacy but also potentially aiding criminal activity. However, Sterlingov’s filing asserts that most users of such services do so for legitimate privacy purposes, and the government has not proven the majority of funds passing through Bitcoin Fog were connected to illicit activity.

The memorandum also alleges the government is double counting funds by including amounts already seized from other darknet market operators and individuals prosecuted for using Bitcoin Fog to launder criminal proceeds. Notable cases included the takedown of darknet marketplace Silk Road. Sterlingov’s lawyers argue he cannot be ordered to forfeit assets he never acquired and were already confiscated by law enforcement.

The filing further claims the government has not met its evidentiary burden to show Sterlingov ever had access to or control over the specific cryptocurrency wallets implicated in the $395 million figure. No private keys, server logs, or other direct evidence was presented demonstrating his dominance over the servers and addresses associated with Bitcoin Fog transactions.

Sterlingov is asking the court to either deny the forfeiture motion entirely or compel the government to provide a full accounting of already seized illicit funds from the darknet market operators and criminals who patronized Bitcoin Fog. The memorandum states that considering applicable case law, joint and several liability is improper for criminal forfeiture judgments.

Please contact BlockTribune for access to a copy of this filing.