US Officials Charge California Resident With Using Bitcoin to Launder $5.3M in Drug Proceeds

U.S. officials charged California resident John Khuu with conspiracy to commit money laundering and the unlawful importation of a controlled substance on Friday, alleging he sold counterfeit drugs for bitcoin.

Khuu was arrested in August 2022, after grand juries in Texas and California returned the indictments in May and August, respectively, a press release said.

According to one of the indictments, Khuu allegedly created vendor accounts on different dark web marketplaces to sell the fake pills and other controlled substances beginning in January 2020. Customers "usually" used bitcoin (BTC) to purchase these drugs, though the indictment suggested other cryptocurrencies may also have been used.

Khuu also allegedly used a network of financial institutions to launder the funds, including Bank of America, Citibank, JPMorgan Chase and Wells Fargo. The indictment alleged he created a number of fake accounts at these banks.

The indictment went on to describe several transactions Khuu allegedly conducted as part of his efforts to convert bitcoin into cash. All told, he allegedly conducted just under 500 transactions tied to the sale of about 620 BTC.

Khuu waived his right to a detention hearing, according to another court filing released on Oct. 6.