Though Silk Road– the dark web marketplace where people could cop illegal drugs and other illicit items with cryptocurrency– has been shut down for a few years now, there are still people going down for getting busy on it. Last week (July 18), Hugh Haney was busted for attempting to launder $19 million worth of bitcoin that he allegedly made selling drugs on Silk Road.
For those who may not be in the know, Homeland Security describes Silk Road with the following words:
Silk Road was designed to be an online criminal marketplace outside the reach of law enforcement or governmental regulation. All transactions on Silk Road could be completed only through use of the cryptocurrency Bitcoin. During its two-and-a-half years in operation, Silk Road was used by several thousand drug dealers and other unlawful vendors to distribute hundreds of kilograms of illegal drugs and other illicit goods and services to more than 100,000 buyers, and to launder hundreds of millions of dollars derived from these unlawful transactions. All told, the site generated sales revenue totaling more than approximately 9.5 million Bitcoins…
Because Silk Road’s payment system essentially involved a Bitcoin “bank” internal to the site, every user had to hold an account in order to conduct transactions on the site. Vendors seeking to sell items, including narcotics, on Silk Road each had a Silk Road Bitcoin address, or multiple addresses, associated with the user’s Silk Road account. Once a transaction was complete, a vendor who had been paid by another user through the transfer of the user’s Bitcoins could then withdraw Bitcoins from the vendor’s Silk Road Bitcoin address by sending them to a different Bitcoin address, outside Silk Road, such as the Bitcoin addresses the vendor personally controlled.
Haney made it on the feds’ radar around 2011. He was allegedly a high-ranking administrator with the popular Silk Road vendor, Pharmville. In 2011 and 2012, DEA agents made controlled buys from Pharmville for narcotics including the highly sought-after opioid Oxycontin. This lead to an authorized search of Haney’s Ohio home in 2018 and the feds found evidence that he was an administrator of Pharmville and was involved in high-level narcotics trafficking.
According to the press release, Haney transferred Bitcoins he allegedly made through Pharmville to an unnamed company that handled bitcoin exchanges in 2017 and 2018. Haney allegedly lied to the company, telling personnel that he had earned his cryptocurrency fortune through Bitcoin mining (the process by which new Bitcoins are created). After Haney successfully exchanged the Bitcoins for $19 million in cash, Homeland Security swooped in and seized it. Haney was then arrested. He faces a total of 30 years in prison if convicted.
According to Cointelegraph, “$515 million in Bitcoin had been spent on illegal activities in 2019 as of the beginning of July, but this only accounted for 1% of total BTC transactions up to that point.”