In the ongoing legal proceedings against Gary Harmon, a mobile image is a crucial piece of evidence. The photo depicts the accused lounging in a money-filled bathtub encircled by scantily-dressed women and serves as proof to the US prosecutors that Gary had indeed gotten access to illicit funds. The younger of the Harmon brothers have been charged with a unique crime: stealing crypto assets worth $5 million (appx) through 713 Bitcoins kept in the FBI’s secure offline “hardware” evidence storage.
The Larry/Gary Story: Crypto Bros and Helix Mixing
Before understanding all about illicit crypto retrieval, it is necessary to have a short grasp of the incidents that led to the current situation. Larry, the elder of the Harmon brothers, has pleaded guilty to facilitating money laundering activities to the tune of $311 million through crypto mixing. However, the 39-year-old Akron resident vehemently denies having any part in the Bitcoin disappearing act. Instead, he pointed the finger at his 30-year-old brother and helped enforcement officials nab Gary.
Crypto Mixing and Dark Web Associations
The apprehension of Larry Harmon on February 2020 became a crypto law enforcement milestone. It was the first time someone had been arrested due to activities such as mixing. The process is a tedious one, making it much harder for analysts to trace and research transactions within crypto communities. The act of “crypto mixing” utilizes blending together fractional digital assets from separate digital owners and jumbling them.
Larry developed a search engine entitled “Grams” in 2014. The engine became a hotbed for Darknet activities such as procurement of drugs, illegal firearms, and even hacking services. Larry earned an attractive 2.5 % commission per transaction allowing users to use the Helix “mixing” application. While crypto mixing proponents proclaim that the technique helps to safeguard privacy, Larry himself presented Helix as a solution to prevent officials trace crypto assets from questionable sources.
Also Read: Blockchain to Disrupt Education: An Overview
US Federal Investigations Against Crypto Theft
Helix appeared under the FBI’s radar during its AlphaBay investigations. The then-largest darknet marketplace, AlphaBay began steering customers through the Helix mixing app in the latter part of 2016. This transition did not go unnoticed, and an FBI undercover agent established the link in between, transferring Bitcoins from the former to the latter.
US authorities shut down AlphaBay on July 2017, concluding that the marketplace was contributing significantly to heroin and fentanyl distributions. However, the identity of the person behind Helix remained unknown. Larry had closed down Helix, after completing a total of 356 thousand transactions in Bitcoin.
Progress was made when IRS criminal investigations unit joined forces with the FBI. In collaboration with Chainalysis, the team used Bitcoin’s underlying public blockchain database to locate the operator, studying countless Helix transactions, and emails. The case was finally cracked through an email used by Larry to buy gift cards on a website using Bitcoin. Apparently, crypto transactions are hard to trace, but not impossible, especially when users try to convert digital assets into cash.
Based on intel gathered from the investigations, federal agents built up an extensive portfolio of Larry’s finances. His cloud account documents also comprised a Google Glass image displaying the Helix admin page. The authorities arrested Larry in early 2020 from his Akron office, along with a Trezor storage device for storing digital assets.
Also Read: What does a Crypto Broker do? What Do You Need to Become One?
Later Events: Taking it Back from the Feds
Gary the younger brother lived adjacent to the office and talked with the authorities on the day of Larry’s arrest. He also attended the court hearing where public prosecutors successfully proved Larry’s status as a potential flight risk. As per the judge’s orders, Larry was locked up in Washington jail, while his lawyers sought a bail release on the March 13, 2020 hearing due to COVID-19. Gary offered recommendations for his brother, mentioning how the older brother had been a positive influence offering him a job and teaching him how to code.
Assistance US Attorney Christopher Brown mentioned to the court on the bail hearing date that Larry potentially had illicit crypto assets worth tens of millions of dollars. The federal agents were unable to access the virtual assets from the crypto storage device without the actual passphrases. However, the online blockchain database confirmed that the address which traced back to Larry did indeed have access to the assets in question.
Within a period of 6 days in April 2020, the IRS agents found out that the Bitcoin assets in custody had been transferred once again. Brown had previously warned that not transferring the assets into government wallet custody would mean that Larry would be free to take the reins back whenever necessary. His forewarnings proved true. However, it was not Larry, but his brother Gary.
Larry complied with Judge Howell’s orders and handed over all his passwords, allowing agents to transfer the remaining 4164 Bitcoins to a more secure wallet. The thefts stopped following this, and within 30 days, Larry helped investigators realize that Gary was the culprit.
Sentencing and Aftermath
The prosecutors managed to convince Larry in pleading guilty to money laundering as well as cooperate in providing evidence against his own brother and other operators in the aftermath. The 20-year prison sentence which Larry is currently facing will likely reduce with his collaboration. However, he still has to pay a civil fine of $60 million imposed by the US Treasury Department.
Meanwhile, US federal agents are currently developing a case against the younger brother Gary. Sources indicate that Fary might have used Bitcoin gambling options to mix the Bitcoins he had acquired from Larry. He had not considered his action’s possible consequences on his brother’s sentencing. Agents also retraced 4 emails sent from no-reply@trezor.io to his Gmail account, highlighting wallet re-creation on the devices.
While Gary vehemently denies these allegations, the abrupt changes in his financial conditions match with the theft of the 519 Bitcoins, at least according to the prosecutors. They are accusing Gary of depositing 68 Bitcoins as collateral to a DeFi crypto lending platform and using the $1.2 million loan raised to purchase a luxury condo in Cleveland. The addition of Gary’s phone image of the cash-filled bathtub certainly made things worse, leading to his eventual arrest in July 2021. Like his elder brother, he was also charged with money laundering, along with other crimes. The conditions set by prosecutors for Gary’s bail comprise him handing over the seed phrases of the crypto storage unit which was seized and is currently in government custody. Gary’s lawyer states that the conditions are unfair, violating his right to the Fifth Amendment.
Wrapping Up
As per the latest updates from a July 2022 hearing, Brown revealed that Gary turned away more than two plea offers, and the scheduled upcoming trial date is in February. The elder brother Larry had been a notable crypto proponent even after shutting down the crypto mixing Helix platform. He later developed Dropbit, a crypto-payment-splitting application. The entire debacle attests to the fact that while crypto has numerous advantages, it is upon users and community members to ensure fair usage and prevent illicit money laundering activities. Meanwhile, security measures need to be upgraded on the government front to prevent such events from happening again.
