A California resident has been sentenced to federal prison for his involvement in a cryptocurrency money laundering conspiracy connected to drug trafficking, according to Acting US Attorney Abe McGlothin, Jr.
The case, prosecuted in the Eastern District of Texas adds to the growing trend of the use of digital assets in illegal financial operations.
Cryptocurrency and Drug Trafficking Network
Court records indicate that John Khuu, 29, of San Francisco, California, and his co-conspirators orchestrated a large-scale money laundering scheme that funneled proceeds from illegal drug sales through cryptocurrency transactions.
The scheme involved importing counterfeit pharmaceutical drugs and MDMA (ecstasy) from Germany, which were then distributed across the United States.
To facilitate payments, customers transferred Bitcoin (BTC) from their dark web accounts into vendor-controlled wallets managed by Khuu and his associates.
The BTC was subsequently converted into US dollars, which were laundered through hundreds of transactions across multiple financial accounts. This complex operation allowed Khuu to evade traditional financial tracking mechanisms, making the illicit funds more difficult to trace.
John Khuu pleaded guilty to conspiracy to commit money laundering and conspiracy to operate an unlicensed money transmitting business. On March 12, 2025, he was sentenced by US District Judge J. Campbell Barker to 87 months in federal prison.
Operation Crypto Runner and Law Enforcement Involvement
Khuu was first indicted on May 18, 2022, in the Eastern District of Texas on money laundering charges. A few months later, on August 17, 2022, he faced additional charges in the Northern District of California for the unlawful importation of a ‘Schedule I’ controlled substance.
On August 19, 2022, federal agents arrested Khuu in Garden Grove, California, executing warrants from both jurisdictions. This case was part of Operation Crypto Runner, an initiative under the Organized Crime Drug Enforcement Task Forces (OCDETF) program.
The report noted:
OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach.
Federal agencies, including the US Secret Service, US Postal Inspection Service, and Homeland Security Investigations (San Francisco), played key roles in investigating and prosecuting this case.
Notably, Khuu’s sentencing by the US Department of Justice is just one of the many crackdown the agency have made recently especially on crypto related illicit activities. On March 12, the US Treasury announced issued a Geographic Targeting Order to fight against illegal activities and their perpetrators.
Yesterday, the @USTreasury Financial Crimes Enforcement Network (FinCEN) issued a Geographic Targeting Order to combat the illicit activities and money laundering of Mexico-based cartels and other criminal actors along the southwest border of the United States.
— Treasury Department (@USTreasury) March 12, 2025
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