Father and son duo jailed for Bitcoin money laundering scheme

A Maryland father and son have been convicted of involvement in a dark web drug trafficking and Bitcoin money laundering scheme.

Joseph Fares, 72, was sentenced to 19 months in federal prison on Jan. 8 after his son Ryan Fares, 38, embezzled bitcoins from illegal drug sales.

Plans for Bitcoin mining in Maryland

Previously convicted felon Ryan Fares was sentenced to 54 months in federal prison, followed by two years of supervised release. The ruling was handed down on January 5, 2023 by Judge Grigsby in the US District Court in Maryland.

The charges stem from an earlier November 2018 scheme to manufacture and distribute alprazolam tablets, commonly known as “Xanax”, in exchange for bitcoins on dark market places.

The case was investigated by multiple law enforcement agencies, including the Drug Enforcement Administration, Internal Revenue Service – Criminal Investigation and local police departments. Court documents show that Ryan Fares, who goes by the alias “XANAXMAN,” received more than 9,138 bitcoins from dark marketplaces in connection with a previous conviction.

Ryan Fares cooperated with authorities before being sentenced for the 2018 crimes. However, after the conviction, law enforcement was able to recover additional drug proceeds in the form of Bitcoin.

Although he claims he did not receive any undisclosed bitcoins in connection with his 2018 conviction, he conspired with his father, Joseph Phares, and others to launder additional income through various financial transactions between October 2019 and April 2021 while incarcerated.

The transactions involve the transfer of Bitcoin to online exchanges and retailers, which Joseph Fares uses. Using a contraband cell phone in prison, Ryan Fares contacted his father to discuss purchases and transfers using encrypted email services.

More than 2,874 bitcoins were captured in the plan

In the year In August 2020, Ryan Fares instructed Joseph Fares to transfer over 2,874 Bitcoin to an international bank.

In September 2020, Joseph Phares completed the transfer of disclosed bitcoins to a third party, all proceeds from Ryan Phares' 2018 drug convictions.

Subsequently, federal agents seized the entire amount on February 10, 2021, with a market value of between $65 million and $150 million at the time of seizure.

An additional 58.7 bitcoins, also linked to Ryan Fares' drug trafficking, were seized on May 11, 2021. Ryan and Joseph Phares must forfeit all bitcoins seized during the investigation.