A San Francisco man has been sentenced to federal prison for his role in laundering drug money using Bitcoin, following an operation that sold MDMA on the dark web.

John Khuu, 29, was sentenced to 87 months after pleading guilty to conspiracy to commit money laundering and operating an unlicensed money-transmitting business.

According to Texas authorities, Khuu imported MDMA from Germany and sold it through various dark web markets, accepting Bitcoin as payment.

Khuu and his partner would then allegedly convert Bitcoin into U.S. dollars through hundreds of transactions across multiple financial accounts to obscure the illicit funds. In a separate case in the Northern District of California, Khuu faces additional charges for the unlawful importation of a Schedule I controlled substance.

Operation Crypto Runner and Bitcoin Money Laundering Crackdown

Khuu’s arrest was part of Operation Crypto Runner, a multi-year investigation led by the Department of Justice (DOJ), the U.S. Secret Service (USSS), and the Postal Inspection Service (PIS).

The operation, first announced in November 2022, led to the arrest of 21 individuals involved in laundering illicit funds from various crypto scams, including real estate fraud, email scams, and romance scams.

Last month, another individual from Montana was convicted for crypto-related money laundering as part of a wider federal crackdown on illicit financial activities in the digital asset space.

The rise of crypto-related money laundering cases

The U.S. government has ramped up efforts to combat money laundering through Bitcoin and other cryptocurrencies. Blockchain analytics firm Chainalysis estimated that over $40 billion was laundered through crypto in 2024, surpassing the previous record set in 2023.

While the firm notes that the actual figure may be higher, tracking illicit funds becomes more difficult when crimes originate off-chain—involving physical drug sales or other real-world criminal activities.

A 2024 risk assessment by the U.S. Treasury found that while traditional methods remain the primary way to launder drug money, the use of cryptocurrency in drug-related financial crimes is growing in both popularity and sophistication.

The DEA’s latest National Drug Threat Assessment also highlighted how Mexican cartels operating in the U.S. have established mutually beneficial relationships with China-based money laundering networks to clean their drug proceeds—increasingly using cryptocurrency as part of their operations.