Roman Sterlingov has been sentenced to 12 and a half years in prison for operating the Bitcoin Fog mixing service, according to the U.S. Department of Justice.
Roman Sterlingov, believed to be the founder of Bitcoin Fog, has been sentenced to 12 and a half years in prison for running what is considered the oldest custodial Bitcoin mixing service on the dark web. The sentence, more lenient than the 20-30 years sought by the prosecution, also includes a financial penalty of over $395.5 million.
In March, after a month-long trial, a jury found Sterlingov guilty of money laundering and operating an unlicensed money transmitting business.
According to a statement from the U.S. Department of Justice on November 8, Bitcoin Fog had earned a reputation over the years as a preferred service for laundering criminal money. During its decade of operation, the platform processed transactions totaling over 1.2 million bitcoins, valued at approximately $400 million at the time.
The Department of Justice claims the funds primarily came from darknet marketplaces and criminal activities related to illegal narcotics, cybercrimes, identity theft, and other illicit acts.
Sterlingov, who during the trial consistently claimed to be just a user of the service and denied managing it or receiving fees from it, will also have to forfeit seized funds amounting to $1.76 million. Additionally, he was ordered to forfeit 1,345 BTC from the Bitcoin Fog wallet, valued at over $103 million. However, the 21,300 bitcoins that Sterlingov allegedly earned while running Bitcoin Fog have never been found by the U.S. government after more than seven years of investigation.
Sterlingov’s defense attorney, Tor Ekeland, argued that the prosecution had no eyewitnesses or solid evidence linking his client directly to the platform’s operations. Ekeland emphasized the lack of records that could place his client at the helm of Bitcoin Fog, pointing out what he believed were weaknesses in the prosecution’s case. Sterlingov’s defense team had requested that the judge impose a prison sentence no longer than seven and a half years.
The evidence leading to Sterlingov’s incarceration all stemmed from the use of Reactor, the proprietary software from Chainalysis, a company specializing in on-chain analysis. The company has been criticized for failing to provide any proof of the scientific validity of its program and for not presenting error coefficients to the courts.
Reactor relies on a series of heuristics: to accuse Sterlingov, Chainalysis used behavioral heuristics, which involve analyzing the behavior of on-chain transactions, such as the type of addresses used, how the rest is handled in transactions, the time payments are made, the transfer amounts, and so on. This approach aims to identify patterns in blockchain transactions.
The problem with this heuristic is its extreme inaccuracy. Previously, Elizabeth Bisbee, Chainalysis’ head of investigations, acknowledged that the company’s clustering methodologies had not undergone a peer review process, as would be expected for a scientific publication, where data and methods are independently examined by other experts in the field.
However, the judge deemed Reactor software “sufficiently reliable,” stating that absolute precision is not necessary for it to be useful as evidence.
The sentencing is part of a broader crackdown by U.S. authorities on cryptocurrency mixing services and coinjoins. Other operators of similar services have also come under legal scrutiny: Roman Storm, co-founder of Tornado Cash, will face a money laundering trial in 2025, while Keonne Rodriguez, a developer of Samourai Wallet, has pleaded not guilty and was released on bail.
Journalist L0la L33tz described the case as “a grave miscarriage of justice” and “another stepping stone in the US Government’s war on financial privacy.”
