Two men, father and son, were sentenced to prison for operating an illicit business involving the dark web and bitcoins.
On May 24, US District Judge S. Maurice Hicks Jr. sentenced the former Shreveport chiropractor and his son to serious time in prison for funneling money through an unlawful bitcoin financial scheme on the darknet.
The 59-year-old and his son, the 30-year-old Michael Aaron Lord, both of Shreveport, Louisiana, the United States, were sentenced to 46 months and 106 months in prison. In addition, the two defendants were also given a sentence of one year and three years of supervised release.
In April, the two suspects pleaded guilty to one count of conspiracy to operate an unlicensed money servicing business. Michael Lord also pleaded guilty to one count of drug conspiracy for agreeing to distribute controlled substances to include alprazolam, a Schedule IV controlled substance, and 5F-AB-Pinaca (a synthetic cannabinoid).
According to the court documents, from 2013 to 2015, the defendants were accepting currency, money orders, and money paks from customers on the dark web. They have provided a service, in which they exchanged those funds for bitcoin. While not the case for some criminals recently, bitcoin should provide a considerable anonymity for the users. Therefore, criminals often exchange their dirty funds (money stolen from the victim’s’ bank accounts, credit cards, etc.) to BTC to avoid the prosecution or the detection by the law enforcement authorities. Contrary to law, the defendants were not registered with FinCEN or were licensed to operate as a money service business within the State of Louisiana, court documents stated. The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions to combat financial crimes, such as money laundering. According to the court documents, the two suspects also failed to report a receipt of more than $31,000. In addition to money laundering, in March 2015, Michael Lord was involved in a drug conspiracy to distribute alprazolam, 5F-AB-Pinaca, and other controlled substances.
“This investigation represents cutting edge criminal activity,” Jerome R. McDuffie, Special Agent in Charge for the New Orleans Field Office of the IRS-Criminal Investigation, said in a statement. The agent stated that the dark web was used to “facilitate monetary transactions in a drug distribution network”. McDuffie emphasized that cybercrime and even drug trafficking on the darknet are emerging areas of criminal activity and that the special agents of the IRS are keen to follow the funds, no matter if those are in the form of digital or paper currency. This is not the first instance of the IRS tracking down crime on the darknet. As many criminals in the past had been arrested after an investigation by the tax authorities, McDuffie added that by following the money, law enforcement authorities are able to trace back the criminals’ locations only by following the funds they had earned from their illicit operations.
The investigation was conducted in a joint action between the IRS-Criminal Investigation, the US Immigrations and Customs Enforcement, Homeland Security Investigations, the Federal Bureau of Investigations, the US Postal Inspection Service, and the Springhill Police Department conducted the investigation. Assistant U.S. Attorney Cytheria D. Jernigan prosecuted the case.