D.C. Appeals Court Hears Bitcoin Fog Venue, IP Evidence Challenge

A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit heard arguments on Tuesday in Roman Sterlingov’s appeal of his 2024 conviction on money laundering and unlicensed money transmission charges tied to the crypto mixing service Bitcoin Fog.

The appeal challenges two main points: whether the government proved that Bitcoin Fog operated in Washington, D.C., and whether an FBI investigator’s ‘IP overlap' analysis reliably linked Bitcoin Fog accounts and transactions to Sterlingov.

Prosecutors told the appeals court that Bitcoin Fog ran an international money transmission business that served U.S. users, including customers in the District, and that venue in D.C. was therefore proper. Defense counsel countered that the service was run abroad and accused federal agents of creating venue by having undercover operatives access the site from inside the district.

Defense attorney Tor Ekeland argued that the government ‘manufactured' venue by directing agents to use Bitcoin Fog from within D.C. He added: ‘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.' Prosecutor Jenny Ellickson maintained that the service’s international transmission of funds to U.S. customers brought the platform within U.S. jurisdiction and permitted a trial in the District.

A central issue at the hearing was the reliability of the FBI investigator’s method that prosecutors describe as ‘IP overlap' analysis. The investigator identified overlapping IP logins and other metadata to connect accounts on Bitcoin Fog to accounts tied to Sterlingov. Defense lawyers questioned whether the technique has known error rates or has undergone peer review. One judge repeatedly pressed the prosecutor for the statistical basis used to conclude that overlapping IP logins belonged to the same user.

Sterlingov was convicted last year on counts that include money laundering conspiracy and operating an unlicensed money transmitting business. At trial, prosecutors presented evidence that Bitcoin Fog handled hundreds of millions of dollars and processed transactions linked to dark web marketplaces.

After oral arguments the case was submitted to the panel, which will issue a written decision to uphold, reverse, or partially vacate the conviction. The court’s ruling will address whether the trial court’s findings on venue and the admissibility or weight of the FBI’s IP analysis stand.

The appeal comes amid debate over how federal unlicensed money transmission law, 18 U.S.C. § 1960, applies to operators and developers of crypto privacy tools. A draft version of legislation under discussion would limit liability under that statute to persons who acted with specific intent and knowledge to move criminal funds. Some policy groups have expressed support for language that ties liability to intent and knowledge, while prosecutors point to facts about how services are operated and marketed when bringing charges.