A Washington state resident has been charged with money laundering after selling Bitcoin for $140,000 in cash to undercover agents.
Bothell’s Kenneth Warren Rhule, 26, met with agents from Homeland Security Investigations on numerous occasions between April to December 2018, often in Seattle-area Starbucks cafes.
According to the unsealed complaint Rhule — who traded on localbitcoins.com under the name Gimacut9 — allegedly closed at least seven deals with agents "posing as criminals" who wanted to buy untraceable Bitcoin with the proceeds of their operations. They told Rhule they were bringing Ukranian women to the U.S. for the purposes of prostitution.
Special Agent Victor Morales from the Drug Enforcement Agency said in the complaint:
“Rhule conducted these transactions even after the undercover agent explained that at least a portion of the cash involved represented proceeds of human trafficking.”
Rhule made an appearance before the US District Court of Seattle on Tuesday. He was charged with conducting an unlicensed money transmitting business and five counts of laundering monetary instruments. The complaint noted that he failed to conduct any Know Your Customer ID verification checks.
The money laundering charges are punishable by up to 20 years in prison, while the marijuana charges are punishable with a minimum of five years in prison, and a maximum of 40 years.
Rhule allegedly boasts of drug operations
On one occasion while waiting for confirmations the Bitcoin had been successfully deposited, Rhule allegedly boasted about doing “5,10 or 20,000 kilo" CBD (Cannabidiol) orders. The investigation found he was running an unlicensed marijuana products business manufacturing items including hash oil. He documented his sophisticated growing operations with photographs uploaded to his Google, iCloud and Instagram accounts — including pictures of Rhule posing with crops of marijuana.
He was also charged with conspiracy to manufacture and distribute marijuana.
Bitcoin dealer extols the virtues of Monero
Rhule also advised the undercover agents that Bitcoin was only pseudo-anonymous and extolled the virtues of Monero which he said was a "100% anonymous cryptocurrency":
“Rhule explained to UCA-1 that Monero operated under the same concept as any cryptocurrency and was verifiable on the blockchain with one important caveat: wallet addresses could not be tracked.”
The ‘Gimacut9’ LocalBitcoins account last made a deal on July 1 2019 and was banned from November 2019 onwards. LocalBitcoins no longer offers a cash for crypto trading option.