- The FBI has confiscated $54 million in cryptocurrencies linked to an illegal narcotics operation in New Jersey
- Christopher Castelluzzo and his co-conspirators converted drug proceeds into cryptocurrencies starting in 2014
- Authorities successfully traced and seized these ill-gotten cryptocurrency assets in 2022 following recorded prison phone calls
The FBI has seized $54 million in cryptocurrencies connected to an illegal narcotics distribution scheme operating in and around New Jersey. The authority froze the assets of Christopher Castelluzzo and a group of co-conspirators which were obtained through a drug trafficking operation in the early 2010s and converted into cryptocurrencies from 2014 onwards. The gang erred in converting their ill-gotten gains into cryptocurrency, with authorities able to trace them and freeze them in 2022, a freeze that has now turned into a seizure.
Criminals Invested in Ethereum ICO
From 2010 to 2013, Castelluzzo and his gang operated a narcotics trafficking ring in New Jersey, resulting in Castelluzzo and other members facing narcotics trafficking charges. This led to convictions and sentencing for federal and state drug distribution offenses, but their criminal enterprise persisted even during Castelluzzo’s federal pretrial release.
During this period, Castelluzzo utilized 15 BTC, generated from illegal drug sales, to acquire 30,000 ETH in Ethereum’s July 2014 Initial Coin Offering, which he then moved offshore to evade taxes. Despite being behind bars, Castelluzzo and others collaborated with associates on the outside to shield their assets from law enforcement.
Recorded Phone Calls Led to Seizure
In 2016, Castelluzzo acquired an additional 30,000 Ethereum Classic coins, which he converted into various cryptocurrencies, but this was to spark his downfall; in 2021, authorities uncovered his plot through recorded prison calls. As a result, they were able to execute a search warrant in July 2022 where they seized the cryptocurrency from the Colorado Springs of their external associate.
FBI – Newark Special Agent in Charge, James E. Dennehy, warned that the use of crypto to evade the law was a fool’s errand:
Many criminals use cryptocurrency on the darknet to operate away from the prying eyes of law enforcement. Our forfeiture action of $54 million should serve as a lesson to those who mistakenly believe we can’t trace their illicit behavior or their ill-gotten proceeds. We will successfully hold all criminals responsible in the open, with real world consequences.
The loot, now worth $54 million, will be held while the gang members are tried and will eventually be sold or auctioned off.
