Prison plot to move $54M ether to Bahamas ends in seizure

More than $50 million worth of ether purchased during the crypto’s 2014 initial coin offering (ICO) is the subject of a forfeiture action from the US Attorney’s Office after it was linked to a New Jersey drug distribution operation.

According to the Department of Justice (DoJ), Christopher Castelluzzo was able to secure 30,000 ether (now worth around $54 million) during Ethereum’s ICO by exchanging bitcoin he made through his drugs network. Castelluzzo sold cocaine and ‘designer drugs’ for bitcoin between 2010 and 2015 and mailed the sold product to his customers. 

He made a further 30,000 Ethereum Classic in 2016 and continued to invest in different cryptocurrencies. However, the operation was eventually discovered and he was arrested, charged, and pled guilty in May of that year.

Castelluzzo was sentenced to 21 years in 2018. However, three years into his sentence, he attempted to launder his 30,000 ether by sending it to an overseas entity. His plot was only discovered after police listened to his recorded prison phone calls.

Read more: Fintech owner laundered millions with bitcoin for ‘finger cutter’ drug lord, police say

Forfeiture documents reveal Castelluzzo and an associate named Brian Krewson discussed moving the funds into a tax haven in either Ireland, Malta, or the Bahamas, while also exploring the possibility of keeping it in USDT. “Dude I would say leave it in USDC, USDT, something (UI) so nobody can touch it,” his associate says. 

A search warrant was subsequently issued and Krewson’s home was raided. Police found the relevant crypto wallets under Krewson’s control and, after Krewson gave up the relevant passwords, police made the ether seizure, valued at $31 million at the time.

In a DoJ statement, FBI special agent James E. Dennehy said: “Our forfeiture action of $54 million should serve as a lesson to those who mistakenly believe we can’t trace their illicit behavior or their ill-gotten proceeds. We will successfully hold all criminals responsible in the open, with real world consequences.”

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