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.
The agency also found Helix had interacted “directly with 39 darknet marketplaces and other illicit markets,” accounting for more than 240,000 bitcoin transactions worth about $39 million. At least 2,097 of those direct transactions were for more than $2,000 worth of bitcoin each.
A majority of Helix’s transactions were on AlphaBay, the dark web’s biggest illicit-goods platform until it was busted by the feds in 2017.
“In or about November 2016, the AlphaBay website recommended to its customers that they use a bitcoin tumbler service to ‘erase any trace of their coins coming from AlphaBay,’ and provided an embedded link to the Tor website for Helix,”. Helix conducted 191,988 bitcoin transactions within AlphaBay, worth more than $27 million, the agency said.
Helix served other big-name market on the dark web, including Dream Market, Valhalla Market, Wall Street Market and Joker’s Stash.
Helix also interacted with BTC-e, the cryptocurrency exchange allegedly run by Alexander Vinnik, a Russian man who is currently on trial in France for charges that include money laundering and involvement in organized crime. “FinCEN observed Helix conducting 1,723 direct bitcoin transactions worth over $904,637 with BTC-e,” the agency said, and Harmon did not file a suspicious activity report on those.
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 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.