Crackdown On Crypto Crime: Feds Move To Confiscate $54 Million From Darknet Drug Lords

The office of the  US Attorney, under the leadership of Philip R. Sellinger, is undertaking a “civil forfeiture action” to retrieve $54 million in crypto. This sum is directly linked to an illicit narcotics distribution network operating on the darknet, with activities centered in New Jersey.

The haul includes approximately 30,000 Ethereum (ETH) coins, valued at roughly $54 million at today’s price, all of which have been traced back to criminal undertakings and were seized by authorities.

Sellinger has clarified that the government’s reach extends beyond traditional fiat currency, stating unequivocally that any financial benefits derived from criminal activity will be subject to seizure, cryptocurrencies included. The US Attorney particularly noted:

The civil action we are taking today seeks to recover millions of dollars of cryptocurrency, which the defendant allegedly obtained from drug sales. Whether it’s as simple as bags of cash or as sophisticated as cryptocurrency, we will take the steps necessary to seize financial gains defendants obtain from criminal activity.

Operation Details And The Path To Seizure

The target of this forfeiture, Christopher Castelluzzo, along with his associates, was involved in a sophisticated drug distribution scheme from 2010 to 2015. The group ventured into the darknet around 2013, where they began accepting Bitcoin in exchange for their illicit products.

The filing indicates that Castelluzzo allocated the Bitcoin profits to acquire a significant sum of Ethereum, totaling 30,000 units, during the crypto’s initial fundraising event in 2014. Furthermore, he procured an equivalent amount of Ethereum Classic two years later. Currently, these digital holdings are subject to seizure under US law enforcement actions.

Castelluzzo, who is presently incarcerated for 20 years on charges of distributing narcotics, was caught in the act of trying to transfer a cache of 30,000 ETH to an international location in what appeared to be an effort to bypass tax obligations.

Authorities, having monitored and recorded his telephone discussions from prison in 2021, uncovered his scheme, leading to the confiscation of the significant amount of crypto associated with his illicit activities.

Recent Crypto Crime Crackdown

Castelluzzo’s case is one of the digital currency crimes busted in the past few months. Taiwanese authorities recently unraveled a significant crypto-related money laundering operation in Taichung, leading to the apprehension of several individuals.

This operation involved the illicit handling of an estimated 324.2 million USDT (Tether). The operation’s exposure resulted from a comprehensive investigation launched in June, which connected the laundering to an investment fraud case that came to light in October 2022.

Meanwhile, in response to the escalating trend of crypto-related offenses, the US Department of Justice has restructured its National Cryptocurrency Enforcement Team (NCET). This specialized unit, established almost two years prior, is dedicated to probing and curtailing crimes associated with digital currencies.

Notably, US Attorney Philip R. Sellinger’s forfeiture action is not an isolated effort but the culmination of an interagency operation. The FBI’s Virtual Assets Unit, Homeland Security Investigations, and various local law enforcement entities have all played a crucial role in tracking and securing these assets.

Featured image from Unsplash, Chart from TradingView