A father and son in Washington have been sentenced to five years in prison for running an illegal $13 million marijuana business alongside a lucrative Bitcoin-for-cash money laundering scheme.
The 28-year-old Kenneth Warren Rule was first discovered laundering money through an unlicensed crypto exchange back in 2018 after he met with an undercover agent in Starbucks and offered to swap his cash for Bitcoin.
It was later revealed that Warren, along with his 47-year-old father, Kenneth John Rule, was also selling marijuana products, including hash oils, for crypto. The pair racked up $13 million in sales and $2.5 million in net profits all without applying for a state license or paying taxes.
In a statement, US attorney Nick Brown described the operation and what could have been an explosive end to the case:
“Not only did this pair produce and distribute marijuana products on the dark web, in violation of the state’s regulatory scheme, they also illegally laundered immense amounts of bitcoin that their enterprise earned,” he said.
“When law enforcement moved in there were more than a dozen firearms — some loaded and ready to be used to protect their drug trade.”
Based on the sheer firepower at the pair’s disposal and the scale of the operation, presiding District Judge John C. Coughenour said he felt justified in handing them a five-year prison sentence.
Rule ran his Bitcoin for cash scheme from Starbucks
Warren’s laundering operation involved frequent trips to Starbucks. He used the cafe as a spot where he could meet the undercover agent who, at the time, was posing as a human trafficker.
The two of them would discuss laundering cash in exchange for Bitcoin and Warren even shared tips with the agent on how to hide your money using crypto. In the end, Warren exchanged $142,000 worth of Bitcoin for cash with the agent despite believing him to be involved with organized crime.
Last year a similar case was concluded when one California resident was sentenced to three years in jail after laundering $13 million worth of Bitcoin.
Like the Rules, Hugo Mejia operated his own unlicensed crypto exchange through which he laundered Bitcoin for cash between May 2018 and September 2020. Mejia was caught after he laundered more than $250,000 worth of Bitcoin for an undercover agent. Interestingly, the two also met in a coffee shop.
Prosecutors working on the father and son case said, “Perhaps, as is so often true in fraud cases, they were motivated by simple greed. But in running their business in this way, they put a lot of people at risk, and disadvantaged others in the industry who chose to play by the rules.”