Father-Son Duo Sentenced for Laundering Cash with Bitcoin in Weed Scheme

The Department of Justice announced the sentencing of a father and son from Monroe, Washington, to five years in prison yesterday after being charged with allegedly operating an illegal marijuana business and using Bitcoin to launder money.

The Department of Justice charged the pair after an investigation by the Department of Homeland Security and the Drug Enforcement Administration in 2020.

Kenneth Warren Rhule, 28, was sentenced to five years for alleged money laundering and conspiring to manufacture and distribute marijuana. His father, Kenneth John Rule, 47, was sentenced to five years in prison for conspiracy to manufacture and distribute marijuana.

According to the DOJ, Kenneth Warren Rhule agreed to exchange Bitcoin for cash, going so far as to offer advice on using digital currency to hide funds. Rhule exchanged $142,000 worth of Bitcoin for cash with agents who were posing as human traffickers who wanted to launder money.

At the time of their arrest on March 11, 2020, Bitcoin was trading at $7,950.81 per coin, according to CoinMarketCap.

At the same time, the DOJ says the pair operated an unlicensed product business using cash and cryptocurrency to sell to customers nationwide. The DOJ says that the operation grossed more than $13 million with a net profit of $2.5 million.

“Not only did this pair produce and distribute marijuana products on the dark web, in violation of the state’s regulatory scheme, they also illegally laundered immense amounts of Bitcoin that their enterprise earned,” said U.S. Attorney Nick Brown. “When law enforcement moved in, there were more than a dozen firearms – some loaded and ready to be used to protect their drug trade.”

Bitcoin’s use in crime continues to be a stick that regulators use to beat back the mainstream adoption of digital currency.

Last month, Jeremy Spence, a 25-year-old Rhode Island crypto trader known as “Coin Signals” on social media was sentenced to 42 months in prison for running what the Department of Justice called a “Ponzi-like” crypto investment scheme.