The American government’s long-running war on privacy escalated this week following the arrest of Coin Ninja’s Larry Harmon on money laundering charges. A Department of Justice statement that “seeking to obscure virtual currency transactions in this way [using mixers] is a crime” means that bitcoiners risk prosecution simply for exercising their right to privacy.
Also read: Treasury Secretary Mnuchin Gives Testimony on Cryptocurrency, New Regulations Rolling Out Soon
First They Came for Larry Harmon
The cryptosphere was rocked on Thursday by the news that Coin Ninja and Dropbit CEO Larry Harmon had been arrested on charges of laundering $311 million from darknet marketplace (DNM) Alphabay. Despite having no direct connection with Alphabay, the Helix mixer Harmon had developed was recommended by the DNM. Coin mixers, or tumblers, are legally used by bitcoin owners to merge their transactions with those of other users, providing a degree of onchain privacy that Bitcoin does not provide by default. Mixers can also be used by criminals for the same purpose.
The grand jury indictment served in Washington, D.C. is a nightmare for Harmon and his family (his wife has since faced telephone threats from blackmailers demanding bitcoin), as well as for Coin Ninja’s employees and customers. Dropbit, described as “Venmo for bitcoin,” sponsored the What Bitcoin Did podcast hosted by Peter McCormack and had a high industry profile. Both of Hamon’s companies have had their assets frozen, including those of customers which were in Dropbit’s custodial Lightning wallet. But the repercussions of Harmon’s arrest threaten to extend much further, affecting anyone who’s ever taken measures to enhance their privacy through deploying onchain obfuscation techniques.
Is Bitcoin Mixing a Crime?
“This indictment underscores that seeking to obscure virtual
