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A federal appeals court heard arguments from prosecutors and defense attorneys over how far U.S. money transmission and venue laws extend to internet-based crypto service platforms during the appeal of alleged Bitcoin Fog operator Roman Sterlingov. The hearing took place Tuesday in the United States Court of Appeals for the District of Columbia Circuit and focused primarily on whether prosecutors had enough evidence to prove Bitcoin Fog operated in Washington, D.C., despite the defense arguing the service was run abroad.
Sterlingov was convicted in 2024 on charges including money laundering conspiracy and operating an unlicensed money transmitting business tied to Bitcoin Fog, a crypto mixing service prosecutors said moved hundreds of millions of dollars linked to darkweb markets.
Defense attorney Tor Ekeland argued prosecutors “manufactured” venue in Washington, D.C., by having undercover agents use Bitcoin Fog from within the district. He said, “If this is the standard for venue in internet cases, then any government agent can just unilaterally send a message to any website anywhere in the world.”
Prosecuting attorney Jenny Ellickson responded that Bitcoin Fog knowingly operated an international money transmission business that served U.S. users and was therefore subject to U.S. laws, including those applicable in Washington, D.C.
The panel also examined the reliability of testimony from an FBI investigator who linked accounts and transactions using “IP overlap” analysis. The defense argued the method lacked established “error rates” and had not been supported by scientific peer review.
One judge appeared to side with the defense on this point, repeatedly questioning Ellickson on the statistical basis that led the FBI investigator to conclude that overlapping IP logins were tied to the same user.
The case is now submitted to the three-judge panel, which will decide whether to uphold, reverse, or partially vacate Sterlingov’s conviction.
The appeal comes amid a broader dispute over how aggressively U.S. prosecutors can pursue developers of crypto privacy tools and services under money transmission laws. The case centers on Section 1960, the federal unlicensed money transmission law also used in prosecutions involving Tornado Cash developer Roman Storm and Samourai Wallet co-founders William Lonergan Hill and Keonne Rodriguez.
The latest draft of the Clarity Act would preserve Section 1960 liability only where a person acts with “specific intent and knowledge” to help move criminal funds. Crypto policy group Coin Center backed the revised language this week, arguing it could make it harder to bring overly broad prosecutions against developers and crypto services.
However, the article notes that standards like “intent” and “knowledge” are subjective and could still leave developers exposed depending on how prosecutors interpret a service’s role in facilitating transactions.
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