Category: Security News

Source: United States Department of Justice Criminal Division

A dual Russian-Swedish national was sentenced today to 12 years and six months in prison for his operation of the longest-running bitcoin money laundering service on the darknet.

According to court documents and evidence presented at trial, from 2011 through 2021, Roman Sterlingov, 36, was involved in operating Bitcoin Fog, the darknet’s longest-running cryptocurrency “mixer.” Over the course of its decade-long operation, Bitcoin Fog gained notoriety as a go-to money laundering service for criminals seeking to hide their illicit proceeds from law enforcement and processed transactions involving over 1.2 million bitcoin, valued at approximately $400 million at the time the transactions occurred. The bulk of this cryptocurrency came from darknet marketplaces and was tied to illegal narcotics, computer crimes, identity theft, and child sexual abuse material.

In March 2024, after a one-month trial, a jury found Sterlingov guilty of money laundering conspiracy, money laundering, operating an unlicensed money transmitting business, and money transmission without a license in the District of Columbia.

In addition to his term of imprisonment, Sterlingov was sentenced to pay a forfeiture money judgment in the amount of $395,563,025.39, and forfeiture of seized cryptocurrencies and monetary assets valued at approximately $1.76 million. In addition, Sterlingov was ordered to forfeit his interest in the Bitcoin Fog wallet, totaling approximately 1,345 bitcoin and currently valued at more than $103 million.

“Roman Sterlingov ran the longest-running bitcoin money laundering service on the darknet, and today he paid the price,” said Deputy Attorney General Lisa Monaco. “In the deepest corners of the internet, he provided a home for criminals of all stripes, from drug traffickers to identity thieves, to store hundreds of millions of dollars in illicit proceeds. Today’s sentence reflects the Department’s determination to dismantle the criminal networks that enable criminal actors to flourish and ensure consequences for the criminals operating them.”

“Roman Sterlingov laundered over $400 million in criminal proceeds through Bitcoin Fog, his cryptocurrency ‘mixing’ service that was open for business to criminals looking to hide dirty money,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Through his illicit money laundering operation, Sterlingov helped criminals launder proceeds of drug trafficking, computer crime, identity theft, and the sexual exploitation of children. Today’s sentencing underscores the Justice Department’s commitment to holding those who facilitate criminal activity fully accountable for their crimes. I am especially proud of the dedicated investigators and prosecutors who worked tirelessly to unmask and prosecute the Bitcoin Fog scheme.”

“As proven at trial, Roman Sterlingov created and used an online tool to process hundreds of millions in illegal transactions, enabling darknet drug dealers and those who sell child sexual abuse material, to operate,” said U.S. Attorney Matthew M. Graves for the District of Columbia. “Today’s sentence sends an unmistakable message: those who help criminals with online payments for their illegal activities will face serious penalties. This prosecution also provides more proof that we have the skilled investigators and talented prosecutors needed to hold those who operate these darknet sites accountable.”

“Clearly, Sterlingov’s attempt to shroud his illicit activities in a cloak of anonymity ultimately failed against the sophisticated collaborative work of our Criminal Investigation special agents and partners,” said Chief Guy Ficco of IRS Criminal Investigation (IRS-CI). “Today’s significant prison term and hundreds of millions in financial sanctions against the defendant emphasizes the seriousness of this conviction and should serve as a stark notice that this type of criminal activity will not be tolerated.”

“The prosecution of Roman Sterlingov and the sentence imposed today should serve as a warning to cybercriminals,” said Assistant Director in Charge David Sundberg of the FBI. “The FBI will not hesitate to use all tools at its disposal and will leverage our extensive partnerships to disrupt the cybercriminal ecosystem and the individuals who provide the key services that facilitate criminal activity.”

The IRS-CI District of Columbia Cyber Crime Unit and FBI Washington Field Office investigated the case. The Justice Department’s Office of International Affairs and FBI’s Virtual Asset Unit provided invaluable assistance. Additional assistance was provided by Japanese, Swedish, Danish, Romanian, and UK authorities, as well as Europol.

Trial Attorneys Jeff Pearlman and C. Alden Pelker of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Special Assistant U.S. Attorney Christopher B. Brown for the District of Columbia are prosecuting the case. Pelker is a member, and Brown is a former member, of CCIPS’ National Cryptocurrency Enforcement Team. Former CCIPS Paralegal Specialist Dr. Divya Ramjee and Paralegal Specialist Angela De Falco for the District of Columbia provided valuable assistance. 

Source: United States Department of Justice Criminal Division

The U.S. Court of Appeals for the First Circuit today affirmed the U.S. District Court for the District of Massachusetts’ ruling in favor of the Justice Department and the Attorneys General of six states and the District of Columbia in their civil antitrust lawsuit to stop the Northeast Alliance between American Airlines and JetBlue.

“Today’s decision is a hard-won victory for the millions of Americans who count on competition between airlines to fly affordably, whether to visit family, to go on vacation, or to travel for business,” said Attorney General Merrick B. Garland. “The airline industry — like every industry — must comply with the antitrust laws that protect consumers and prohibit anticompetitive coordination.”

“Today’s decision is yet another litigation victory for the Antitrust Division and American travelers who depend on competition for lower airfare and higher quality,” said Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division. “I am incredibly grateful for the hard work and dedication of the Antitrust Division staff that investigated and litigated this case, and to the state law enforcement partners who brought this case with us.”

The court’s opinion followed a judgment by the district court upholding the Justice Department’s challenge to American Airlines and JetBlue’s Northeast Alliance in May 2023. The Northeast Alliance was a series of agreements between American Airlines and JetBlue through which the two airlines consolidated their operations in Boston and New York City. The district court ruled that JetBlue and American Airlines’ decision to stop competing in Boston and New York, where they are major players, violated Section 1 of the Sherman Act because it eliminated competition for American travelers in many domestic markets for scheduled air passenger service, and the court of appeals affirmed that decision.

Source: United States Department of Justice Criminal Division

Telefónica Venezolana C.A. (Telefónica Venezolana), a Venezuela-based subsidiary of Telefónica S.A. (Telefónica), a publicly traded global telecommunications operator based in Spain, will pay over $85.2 million to resolve an investigation by the Justice Department into a scheme to bribe government officials in Venezuela to receive preferential access to U.S. dollars in a currency auction.

Telefónica Venezolana entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the Southern District of New York charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).

“Telefónica Venezolana bribed Venezuelan government officials to participate in a government auction through which it exchanged Venezuelan bolivars for U.S. dollars. The company concealed the illicit payments by purchasing equipment at inflated prices from two suppliers who paid the bribes on the company’s behalf,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “Telefónica Venezolana chose to support a corrupt regime to circumvent the difficulties of conducting legal business in Venezuela. This resolution is yet another example of the Justice Department’s commitment to fight corruption and hold companies accountable for their criminal conduct.”

“Telefónica Venezolana, a subsidiary and agent of a U.S. issuer, agreed to line the pockets of corrupt Venezuelan officials to gain access to U.S. currency and maintain its position in the Venezuelan telecommunications market,” said U.S. Attorney Damian Williams for the Southern District of New York. “Intermediaries then funneled the bribe payments through U.S. correspondent bank accounts. This office will not tolerate the use and abuse of the U.S. financial system to enrich corrupt foreign officials and those who maintain their market position by appeasing them.”

“This case is an example of the IRS Criminal Investigation (IRS-CI)’s and our law enforcement partners’ relentless effort to fight corruption and protect United States interests,” said Executive Special Agent in Charge Kareem Carter of the IRS-CI Washington Field Office. “We are committed to pursuing investigations into corporate fraud in an effort to protect consumers from bearing the costs associated with criminal activity.”

“Telefónica Venezolana engaged in a complex and criminal financial fraud scheme, in which they bribed Venezuelan government officials to obtain access to U.S. dollars,” said Executive Associate Director Katrina W. Berger of Homeland Security Investigations (HSI). “Thanks to the cooperative efforts of HSI, IRS-CI, and the Justice Department, the perpetrators of this conspiracy will be forced to pay for their illicit actions. HSI will continue to collaborate with our law enforcement partners, at home and overseas, to investigate and bring to justice any corporations engaging in such financial crimes.”

According to court documents and admissions, in 2014, Telefónica Venezolana participated in a government-sponsored currency auction in Venezuela that allowed it to exchange its Venezuelan bolivars for U.S. dollars. To ensure its success in the auction, Telefónica Venezolana recruited two suppliers to make approximately $28.9 million in corrupt payments to an intermediary, knowing that some of those funds would be paid as a “commission” to Venezuelan government officials. To conceal the bribe payments, Telefónica Venezolana covered the cost of the bribes by purchasing equipment from the two suppliers at inflated prices. As a result of its corrupt payments, Telefónica Venezolana was permitted to exchange and subsequently received over $110 million through the currency auction, which it used to purchase equipment from the two suppliers it recruited to join the scheme. These funds represented over 65% of the funds that the Venezuelan government awarded in the 2014 currency auction.

As part of the DPA, Telefónica Venezolana and its corporate parent, Telefónica, have agreed, among other things, to continue cooperating with the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of New York in any ongoing or future criminal investigation arising during the term of the DPA. In addition, Telefónica Venezolana and Telefónica have agreed to enhance their compliance program where necessary and appropriate, and to report to the government regarding remediation and implementation of their enhanced compliance program.

The Justice Department reached this resolution with Telefónica Venezolana based on a number of factors, including, among others, the nature and seriousness of the offense. Telefónica Venezolana received credit for its cooperation with the department’s investigation, which included: (i) making regular factual presentations to the department based on the information learned in the course of Telefónica Venezolana’s internal investigation; (ii) voluntarily making employees based outside the United States available for interviews in the United States; (iii) producing a significant number of documents to the department, while navigating foreign data privacy and related laws; and (iv) collecting, analyzing, and organizing voluminous evidence and information for the department, accompanied by translations of documents. However, in the initial phases of the department’s investigation, Telefónica Venezolana failed to timely identify, collect, produce, and disclose certain records and important information, which affected investigative efforts by the department and reduced the impact of Telefónica Venezolana’s cooperation.

Telefónica Venezolana also engaged in timely remedial measures, including: (i) disciplining certain employees involved in the relevant misconduct or who were otherwise made aware of the misconduct, including terminating employees; (ii) strengthening its anti-corruption compliance program by building and empowering an independent compliance function, appointing a Chief Compliance Officer with direct access to the Audit Committee of the Board of Directors, and investing in additional compliance resources throughout its global operations; (iii) overhauling its review and approval process for transactions with non-standard pricing, including by ensuring that the compliance function reviews all such transactions globally; (iv) reviewing, enhancing, and testing its broader internal controls for pricing and other transactions with the assistance of a forensic accounting firm; (v) strengthening processes for vetting, engaging, and monitoring third parties, including implementing additional controls concerning payments to third parties through a proprietary software tool; and (vi) establishing risk assessment and audit processes to regularly review and update the compliance program and otherwise mitigate business risks.

In light of these considerations, as well as Telefónica Venezolana’s and Telefónica’s prior history, which includes a resolution involving a subsidiary of Telefónica, Telefónica Brasil S.A., in an action brought by the Securities and Exchange Commission in 2019 for alleged violations of the accounting provisions of the FCPA, the criminal penalty of $85,260,000 calculated under the U.S. Sentencing Guidelines reflects a 20% reduction off the fifth percentile above the low end of the otherwise applicable guidelines fine range.

IRS-CI and HSI are investigating the case as part of the IRS Global Illicit Financial Team in Washington, D.C.

Senior Litigation Counsel Nicola Mrazek and Trial Attorney Abdus Samad Pardesi of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jilan Kamal for the Southern District of New York are prosecuting the case.

The Justice Department’s Office of International Affairs and authorities in Panama, Switzerland, and Luxembourg provided assistance in this matter.

The Criminal Division’s Fraud Section is responsible for investigating and prosecuting FCPA and Foreign Extortion Prevention Act matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.

Source: United States Department of Justice Criminal Division

A federal jury convicted a pharmacy owner and his brother today for conspiracy to commit health care fraud and wire fraud.

According to court documents and evidence presented at trial, Raad Kouza, a pharmacist in Wayne County, Michigan, and his brother, Ramis Kouza, of Oakland County, Michigan, billed Medicare, Medicaid, and Blue Cross Blue Shield of Michigan for prescription medications that they did not dispense at pharmacies they owned or operated in Michigan. The defendants collectively caused over $15 million of loss to Medicare, Medicaid, and Blue Cross Blue Shield of Michigan.

Raad Kouza and Ramis Kouza were convicted of conspiracy to commit health care fraud and wire fraud. Raad Kouza was also convicted of one count of health care fraud. Both defendants face a maximum penalty of 20 years in prison on the conspiracy count, and Raad Kouza faces a maximum penalty of 10 years in prison on the health care fraud count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors. Sentencing hearings will be set at a later date.

Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division; Special Agent in Charge Cheyvoryea Gibson of the FBI Detroit Field Office; and Special Agent in Charge Mario Pinto of the Department of Health and Human Services Office of Inspector General (HHS-OIG) made the announcement.

The FBI Detroit Field Office and HHS-OIG investigated the case.

Trial Attorneys Claire Sobczak Pacelli, Jeffrey A. Crapko, and Andres Q. Almendarez of the Criminal Division’s Fraud Section are prosecuting the case.

The Fraud Section leads the Criminal Division’s efforts to combat health care fraud through the Health Care Fraud Strike Force Program. Since March 2007, this program, currently comprised of nine strike forces operating in 27 federal districts, has charged more than 5,400 defendants who collectively have billed federal health care programs and private insurers more than $27 billion. In addition, the Centers for Medicare & Medicaid Services, working in conjunction with HHS-OIG, are taking steps to hold providers accountable for their involvement in health care fraud schemes. More information can be found at www.justice.gov/criminal-fraud/health-care-fraud-unit.

Source: United States Department of Justice Criminal Division

The Justice Department filed a lawsuit today against the Mississippi State Senate for discriminating against a Black former staff attorney in its Legislative Services Office (LSO). The lawsuit, filed in the U.S. District Court for the Southern District of Mississippi, alleges that the Senate paid her about half the salary of her white colleagues in violation of Title VII of the Civil Rights Act of 1964 (Title VII).

Title VII is a federal statute that prohibits racial discrimination in compensation and other forms of employment discrimination on the basis of sex, race, color, national origin or religion.

“Discriminatory employment practices, like paying a Black employee less than their white colleagues for the same work, are not only unfair, they are unlawful,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “The Black employee at issue in this lawsuit was paid about half the salary of her white colleagues in violation of federal law. This lawsuit makes clear that race-based pay discrimination will not be tolerated in our economy. Our work to eliminate race-based pay disparities is about promoting compliance with the law and promoting equity and fairness for all workers.”

The department alleges in the complaint that the Senate discriminated against Kristie Metcalfe by paying her significantly less than every other LSO attorney, all of whom were white. The complaint further alleges that Ms. Metcalfe and these other attorneys had substantially the same job responsibilities and yet she was paid less than these attorneys throughout her eight-year tenure. The LSO is a non-partisan office that provides legal services, such as drafting bills, for all members of the Senate. In the 34 years prior to Ms. Metcalfe’s hire, the LSO employed only white attorneys.

The complaint alleges the pay gap between Ms. Metcalfe and her white colleagues began when she was hired and was perpetuated in several additional discriminatory pay actions. In 2011, Ms. Metcalfe was paid a starting salary significantly lower than any LSO attorney in over 30 years. Just one month after her hire, every attorney but Ms. Metcalfe was given a substantial raise, further widening the pay gap and leaving her with a salary less than half of what her white colleagues were earning. In the following years, the Senate consistently paid Ms. Metcalfe many times less than her white colleagues. Finally, near the end of Ms. Metcalfe’s tenure, the Senate hired a white attorney with no previous legislative experience and a similar number of years of legal experience as Ms. Metcalfe at a salary significantly higher than Ms. Metcalfe’s. At a meeting with Senate officials responsible for setting LSO salaries, Ms. Metcalfe complained about the pay disparity with the new hire, but the Senate denied her request for comparable pay.

Through this lawsuit, the department is seeking back pay and compensatory damages for Ms. Metcalfe, in addition to injunctive and other appropriate relief.

The Equal Employment Opportunity Commission (EEOC)’s Jackson Area Office investigated and attempted to resolve Ms. Metcalfe’s charge of discrimination before referring it to the Justice Department for litigation. More information about the EEOC is available at www.eeoc.gov.

The full and fair enforcement of Title VII is a top priority of the Justice Department’s Civil Rights Division. Additional information about the Civil Rights Division and the Employment Litigation Section is available at www.justice.gov/crt/ and www.justice.gov/crt/employment-litigation-section.

Trial Attorneys Louis Whitsett and Young Choi of the Civil Rights Division’s Employment Litigation Section and Assistant U.S. Attorney James Graves III for the Southern District of Mississippi are handling the case.