Banking and Finance Law Daily Wrap Up, CRIMES AND OFFENSES—D.C. Cir.: Bitcoin mixer money laundering conviction based on blockchain tracing affirmed, (Sep 28, 2026)

By Charles A. Menke, J.D.

The defendant received a 150-month sentence for creating and operating Bitcoin Fog, a bitcoin mixer, for the purpose of money laundering and hiding illicit activity.

The U.S. Court of Appeals for the District of Columbia Circuit affirmed Roman Sterlingov’s Bitcoin Fog convictions and 150-month prison sentence, holding that the district court properly admitted expert testimony based on Reactor, a Chainalysis, Inc. blockchain tracing tool. The court also ruled that Reactor’s machine-generated outputs were not testimonial statements under the Confrontation Clause and that Sterlingov had no right to confront the software or obtain its source code on the facts presented (United States v. Sterlingov, No. 24-3161 (D.C. Cir. Sept. 25, 2026)).

Blockchain tracing. Prosecutors accused Sterlingov of creating and operating Bitcoin Fog to aid money laundering and conceal illicit activity. At trial, the government presented testimony that “Reactor,” a Chainalysis tool used to trace cryptocurrency transactions by “clustering” bitcoin addresses to a single entity, attributed more than 900,000 addresses to Bitcoin Fog and identified approximately 80,000 bitcoin sent to the mixer by eight darknet markets. On appeal, Sterlingov disputed Reactor’s reliability and, as part of his defense, his lack of access to the tool’s underlying workings.

Although the government witnesses acknowledged that Reactor had not been peer reviewed and that they did not know its error rate, the appellate panel upheld the district court’s admission of their testimony. The court relied on evidence that Reactor was an industry-standard tool widely used by law enforcement and private-sector specialists, treating that general acceptance as support for reliability. The court concluded that the district court did not abuse its discretion in weighing those reliability indicators against the missing peer review and unknown error rate.

Sterlingov also challenged the district court’s decision to deny him access to Reactor’s source code. The source-code dispute arose after the district court allowed Sterlingov’s counsel and qualified experts to review Reactor’s heuristics and assumptions under a protective order while barring Sterlingov personally from the discovery. The district court reasoned that direct disclosure could provide a roadmap for evading blockchain tracing. It later denied a subpoena for Reactor’s source code, finding that Sterlingov had not shown a need for it given his counsel’s access to the disclosed material.

The appeals court likewise rejected Sterlingov’s claim that withholding the code violated his confrontation rights. According to the court, machine-generated outputs are neither hearsay statements nor testimonial, so they do not create a right to confront the software itself. Even if human programming judgments could implicate confrontation rights, the court reasoned, those rights would at most concern Reactor’s programmers and would not require Chainalysis to disclose its code on these facts. The court also upheld the access restriction against due process and Confrontation Clause challenges.

Venue and sentence. The court disposed of Sterlingov’s other trial challenges more briefly. It held venue proper in the District of Columbia across four convictions for conspiracy and substantive money laundering and two unlicensed money transmission offenses. It rejected limitations arguments based on undercover transactions in November 2019 and evidence that Bitcoin Fog continued operating through 2021. The court also upheld a willful-blindness instruction: Sterlingov disputed whether he saw messages identifying an illicit purpose, while Bitcoin Fog automatically deleted records weekly, had no account-verification process, and asked users no questions.

The sentencing dispute turned on the application of sentencing guidelines governing commingled lawful and unlawful funds. The government valued all funds processed through Bitcoin Fog at approximately $400 million, yielding a 28-level enhancement. Sterlingov argued for approximately $78 million and a 22-level enhancement. The district court adopted the government’s calculation, which the D.C. Circuit affirmed holding that Sterlingov bore the burden of separating lawful from unlawful funds. Because Sterlingov failed to present any evidence showing that the remaining funds were legitimate, he failed to satisfy that burden, the court concluded. Accordingly, the 150-month sentence was left intact.

The case is No. 24-3161.

Judge: Wilkins, R.

Attorneys: Jenny C. Ellickson, U.S. Department of Justice, for the U.S. Tor Ekeland (Tor Ekeland Law PLLC) for Roman Sterlingov.

Companies: Bitcoin Fog; Chainalysis, Inc.

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