A LocalBitcoins user in Washington state has been arrested and charged with money laundering following a sting operation by Homeland Security Investigations (HSI) and Drug Enforcement Administration (DEA). Kenneth Rhule, 26, was busted after selling Bitcoin worth $140,000 to undercover agents who posed as criminals in the latest episode of law enforcement using LocalBitcoins to trap illegal Bitcoin selling.
DEA Agents Answer the Call
Rhule first advertised his intention to sell some Bitcoin in April 2018, to which a DEA agent responded and arranged a meeting. It isn’t clear why Rhule was targeted, but the first meeting and subsequent meetings saw him discuss his growing business illegally manufacturing and selling CBD oil products as well as his desire to quickly liquidate large amounts of Bitcoin.
Meanwhile, the agents pretended to belong to the criminal underworld, but Rhule continued to sell to them anyway, which put him in an even worse position legally. Rhule also informed the undercover agents that he could “wash” the Bitcoin buy swapping it for Monero, thus making it “100% anonymous”.
Having discovered he was breaking the law on multiple fronts, the agents continued to ‘deal’ with him and bought Bitcoin to the tune of $140,000 over a six-month period, until he disappeared from LocalBitcoins in early 2020, having been banned since November 2019.
Charges Brought Against Rhule
At this point the DEA applied to have Rhule charged with Operating an Unlicensed Money Transmitting Business and Money Laundering alongside other drugs charges.
LocalBitcoins has long been a route through which law enforcement officials have targeted illegal Bitcoin selling, using the exact same method that nabbed Rhule. In fact, many cases involving Bitcoin earned through the Silk Road and captured in LocalBitcoins sting operations are currently progressing through the courts.
LocalBitcoins banned the practice of selling Bitcoin for cash in June last year, but clearly some are still trying their luck, although the practice is clearly getting riskier and riskier.