Darknet scheme with crypto and $7.2M laundering: the Manhattan District Attorney reports guilty pleas by the defendants in a darknet case that organized large-scale shipments of controlled substances across the United States.

Details of the $7.2M Scheme and Consequences for the Defendants

The District Attorney particularly highlights the scale of the logistics and a durable monetization setup: orders were placed on darknet marketplaces, payments were accepted in cryptoassets, and the goods were mailed from New York and California using fictitious return addresses and concealing packaging. The laundering itself included converting cryptocurrency into fiat through interrelated wallets and crypto services, splitting flows, and subsequent cash withdrawals.

Thus, this case unfortunately illustrates a typical cycle of illicit money flows: on-chain segmentation of proceeds from darknet markets, moving funds into more liquid assets, using services with weakened KYC practices, and cashing out through cash-out services and banking channels. Such a profile generates expected AML triggers: repeated transaction patterns to addresses associated with marketplaces and mixers, behavioral anomalies by time and amounts, frequent activity in short intervals, as well as intersections with law-enforcement address lists.

The defendants are:

Nan Wu (Flushing, NY) – Criminal Sale of a Controlled Substance in the Second Degree (class A-I felony, 4 counts) and Money Laundering in the First Degree (class B felony, 1 count); 6½ years in prison, concurrent to 4-to-12 years, plus 5 years of post-release supervision; forfeiture of approximately 20 bitcoin, 3,297 Monero, and $12,857 in cash.
Peng Peng Tang (San Gabriel, CA) – Criminal Possession of a Controlled Substance in the Third Degree (class B felony, 1 count); 1½ years in prison and 1 year of post-release supervision; forfeiture of approximately 20 bitcoin, 3,297 Monero, and $131,500 in cash.
Bowen Chen (Baldwin Park, CA) – Conspiracy in the Second Degree (class B felony, 1 count) and Criminal Sale of a Controlled Substance in the Third Degree (class B felony, 4 counts); 2 years in prison, concurrent to 1-to-3 years, plus 1 year of post-release supervision.
Zixiang Lin (Flushing, NY) – Conspiracy in the Fifth Degree (class A misdemeanor, 1 count); 1 year of conditional discharge.
Katie Montgomery (South Portland, ME) – Conspiracy in the Fifth Degree (class A misdemeanor, 1 count); 1 year of conditional discharge.

Regulators Are Improving Approaches to Tracking Increasingly Complex Schemes

Perhaps one of the most important facts here is that the investigation was built by merging off-chain and on-chain evidence. This indicates that if a few years ago law enforcement struggled to piece together such flows, today monitoring practices have matured sufficiently, and the District Attorney can assemble and assess a solid evidentiary record. Ultimately, tracking and preventing real crimes benefits the development of crypto, taking it out of the shadow sector and preventing the discrediting of the technology’s original goals. Stay tuned for the latest updates and opportunities in the new economy, crypto industry, and blockchain developments.

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