(Bloomberg) -- The founder of a cryptocurrency mixing service known as Bitcoin Fog was convicted in Washington federal court of helping to launder tens of millions of dollars from darknet markets known for selling illegal drugs.

A jury on Tuesday concluded Roman Sterlingov, 35, provided a service that jumbled digital tokens to make it more difficult to find the source of proceeds from illegal activities. Prosecutors said Bitcoin Fog processed more than $400 million in untraceable transactions, including $78 million involving known darknet markets. 

The verdict is the latest win for the US in a crackdown on crypto criminals, including the November conviction of FTX co-founder Sam Bankman-Fried. Sterlingov, a Russian-Swiss national who testified in his own defense and denied he ever ran Bitcoin Fog, faces up to 20 years in prison on the most serious charges. Sterlingov, who’s been in custody for nearly three years, will be sentenced on July 15. 

“The defendant set up the whole operation to help criminals hide their assets,” prosecutor Catherine Pelker told jurors during closing arguments. Pelker said it is clear from the evidence that Sterlingov was “instrumental” in setting up Bitcoin Fog.

After about two days of deliberations, jurors found Sterlingov guilty on all four counts, which included conspiring to launder money, money laundering, and two charges related to running an unregistered money transmitting service.

“Darknet criminals should know by now that operations like Bitcoin Fog cannot provide the anonymity for cryptocurrency transactions that they claim they can,” Matthew M. Graves, the US Attorney for the District of Columbia, said in a statement.

Defense lawyer Tor Ekeland called the verdict “disappointing” and said they will appeal. 

“This is just the halfway point,” Ekeland said.

During the monthlong trial, prosecutors showed jurors how the government traced the flow of crypto from darknet markets through Bitcoin Fog. They also highlighted a multistep process they say Sterlingov used to pay for the Bitcoin Fog domain name more than a decade ago.

The government also turned to two other crypto criminals to testify about mixers: Ilya Lichtenstein, who pleaded guilty to a money laundering conspiracy last year, and Larry Harmon, who admitted to running a mixer called Helix. 

Lichtenstein, who was charged along with his social-media rapper wife, told jurors he used Bitcoin Fog to launder some of the $4.5 billion in crypto stolen from the hack of Bitfinex. Both he and Harmon said they didn’t know Sterlingov.

Read More: Wall Street-Backed Crypto Tracer Faces ‘Junk Science’ Attack

Sterlingov testified he worked in information technology and helped create domain names for clients while employed by a marketing and web firm and as a freelancer. He said he didn’t remember whether he created the Bitcoin Fog domain name and doubted that he’d done so. He also didn’t recall certain transactions, noting they’d happened long ago. 

The government said it found some small-value transactions that originated from an account registered in Sterlingov’s name that appeared to test Bitcoin Fog before it launched in 2011. Sterlingov has said he was a user of Bitcoin Fog, but didn’t collect fees as the government claimed.

“There is no evidence anywhere that Mr. Sterlingov operated Bitcoin Fog,” including no eyewitness accounts or server logs, Ekeland told jurors during closing arguments. 

The government didn’t find any references to Bitcoin Fog on Sterlingov’s electronic devices or notebooks, Ekeland said. He also questioned the logic of Sterlingov using a secretive multistep process to fund Bitcoin Fog when the transaction started with an easily-traceable account registered in Sterlingov’s name.

The defense also questioned the reliability of Wall Street-backed firm Chainalysis, which the Justice Department and Treasury Department have consistently used to help trace the flow of crypto in money laundering cases. 

The government said that the company is reliable, and the judge agreed. Prosecutors said they also used other methods to link Sterlingov to operating Bitcoin Fog. Chainalysis has previously called attacks on its credibility a “fundraising ploy” and an effort to assist the crypto world escape accountability.

--With assistance from David Voreacos.

(Updates with US attorney’s statement and amount processed for darknet markets.)

©2024 Bloomberg L.P.