Feds Siezed Stolen Crypto Funds And A "Hacker" Stole It Back From The Feds.

The full story is here but for those with no Bloomberg subscription I'll break it down.

In 2014, a dude named Larry Harmon created a search engine called Grams. It helped users scour the darknet for illegal drugs, guns, and hacking services etc. Users could then basically launder the money using a mixing service he ran called Helix, earning Larry 2.5% on each transaction.

In late 2016, AlphaBay another separate illicit market on the darknet, began pushing its "customers" to Helix. US authorities were looking at all this activity and an undercover FBI agent transferred Bitcoin from AlphaBay to Helix, prove a link between the two. In July 2017 AlphaBay was shut down, but authorities didn’t yet know who ran Helix. It was months later when Larry closed down the mixer, after having completing 356,000 Bitcoin transactions. He also went ahead and developed Dropbit, an app he dubbed as "the Venmo of crypto" for transfers between users. Larry was a huge promoter of Bitcoin and his company Coin Ninja.

Larry was eventually found out as authorities worked with Chainalysis using the bitcoin blockchain to track helix transactions and was later arrested and pleaded guilty to laundering 311 million in crypto. Authorities also found a Trezor wallet on him. Agents couldn’t gain access to them from the storage device found in his office because they didn’t have the correct passphrases to unlock them.

Gary Harmon, Larry's brother, lived across the hall from the office. He talked to agents that morning and attended the hearing where prosecutors convinced a judge that Larry was a flight risk and should stay locked up. Gary, who wrote letter of support about Larry’s positive influence on his life, saying his older brother had given him a job, taught him coding, and “truly made me a better person.”

In April 2020, IRS agents realized Bitcoin was disappeared from the faddresses they had flagged prior. Judge Howell said she was “very skeptical” that this had occurred without Larry’s knowledge and direction. “Do you understand that?” the judge asked. “Yes, I do know,” Larry said. “Don’t try and be cute with me,” the judge snapped.

Howell ordered Larry to turn over all his passwords so agents could transfer the remaining 4,164 Bitcoins—then valued at $40 million—to a secure wallet. Larry did, and the thefts stopped. Less than a month later, authorities were told by Larry that Gary was the culprit, and also from another informant. Larry faces up to 20 years in prison, but his cooperation with prosecutors will likely earn him a lesser sentence. He’s also been served a $60 million civil fine from the US Department of the Treasury.

Federal agents began building a case against Gary. An informant told them Gary had asked fpr advice on Bitcoin gambling services. The source believed Gary wanted to use them to mix Bitcoin which he took from Larry. Gary is “not the sharpest tool in the shed and did not think through the consequences for his brother” before he moved the Bitcoin, the informant said. Agents later found emails from Trezor in Gary's wallet that reflect his wallet re-creation. He has denied taking the Bitcoin. Interviewed by agents in July 2020, he said, “If I took it, why wouldn’t I take it all?”

Recently, Gary’s lawyer said in court that “just because the government cannot manage to keep up with its technology, that is not the defendant’s problem.”

Agents traced 519 of the stolen Bitcoin through two mixers and prosecutors say the transactions correspond to a “dramatic transformation” in Gary’s finances. It is said he deposited 68 Bitcoin with the BlockFi. He used most as collateral for a $1.2 million loan. And of course, some of this went to buy a luxary condo in Cleveland. (Always a big mansion with these people, because that's so unassuming.) Within the government filings, there were also pictures of him in a bathtub full of dollar bills surrounded by scantily clad women. Because of couse he was.

Gary was arrested in July 2021, on money laundering and other crimes. He, like his brother, requested bail. He was told to turn over the seed phrases to secure his bail. His lawyer said that condition effectively admittance of the crimes, which violates his Fifth Amendment right against self-incrimination.

At a July hearing, prosecutor Brown said Gary turned down two plea offers. His trial is scheduled for February.

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https://preview.redd.it/99wc8a10rlr91.png?443&format=png&auto=webp&s=52e92732983c844dbe986b0781af759afef50454

And yes their names are Larry and Gary.