Bitcoin Fog Appeal Tests DOJ Venue Theory in D.C. Court

A federal appeals court heard arguments on Tuesday in the United States Court of Appeals for the District of Columbia Circuit over how far U.S. money transmission and venue laws extend to internet-based crypto service platforms in the appeal of alleged Bitcoin Fog operator Roman Sterlingov, according to The Block.

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 that prosecutors said moved hundreds of millions of dollars tied to darkweb markets. The central question before the three-judge panel is whether prosecutors presented sufficient evidence to prove Bitcoin Fog operated in Washington, D.C., despite defense arguments that the service was run abroad.

Venue and Jurisdiction Arguments

Defense attorney Tor Ekeland argued that the government artificially “manufactured” a venue in D.C. by having undercover agents use Bitcoin Fog from within the district. “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,” Ekeland argued, according to the source.

Prosecuting attorney Jenny Ellickson countered 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 specific to D.C.

Technical Evidence Under Scrutiny

The panel spent considerable time examining the reliability of testimony from an FBI investigator who linked accounts and transactions using “IP overlap” analysis. The defense argued this methodology lacked established “error rates” or “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.

Next Steps

The case is now submitted to the three-judge panel, which will decide whether to uphold, reverse, or partially vacate Sterlingov’s conviction.

Broader Money Transmission Law Battle

The appeal comes amid a contentious debate over how aggressively U.S. prosecutors can pursue developers of crypto privacy tools and services under money transmission laws. At the center is Section 1960, the federal unlicensed money transmission law also used against Tornado Cash developer Roman Storm and Samourai Wallet co-founders William Lonergan Hill and Keonne Rodriguez.

The latest draft of the Clarity Act now proposes preserving 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, 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, according to the article.

FAQ

What is the main legal issue in the Bitcoin Fog appeal?

The central question is whether prosecutors provided sufficient evidence to prove Bitcoin Fog operated in Washington, D.C., and therefore fell under D.C. jurisdiction. The defense contends the government artificially created venue by having undercover agents access the service from within the district, while prosecutors argue the service knowingly operated as an international money transmission business serving U.S. users.

What is Section 1960 and how does it apply to crypto services?

Section 1960 is the federal unlicensed money transmission law that prosecutors have used against developers of crypto privacy tools and mixing services. The law is currently at the center of a debate over how broadly it can be applied to crypto developers, with the proposed Clarity Act seeking to narrow liability to cases involving “specific intent and knowledge” to help move criminal funds.

What evidence did the panel question during oral arguments?

The panel focused significant attention on the reliability of FBI testimony using “IP overlap” analysis to link accounts and transactions. The defense argued this methodology lacked established error rates or scientific peer-review, and at least one judge appeared skeptical of the statistical basis used to conclude that overlapping IP logins belonged to the same user.