Bitcoins Stolen While Authorities Watched

According to reports, the crypto assets, worth around $5 million at the time, were stored in a hardware wallet obtained from Harmon’s brother Larry after the authorities arrested him in February 2020.

Larry operated a crypto mixing platform and was charged for laundering $311 million in crypto through dark web marketplaces where properties obtained illegally were sold without revealing the transaction records, making it impossible to trace.

Harmon’s brother pleaded guilty last year and was sentenced to 20 years in prison. However, before his sentencing, Gary attended two of his bail hearings where he learned that prosecutors did not have the key phrase to access his brother’s crypto stored in a Trezor device.

The confiscated software “allows someone to generate a seed phrase or combination of as many as 24 words that can re-create private keys to allow someone to go online and use a Bitcoin address for transactions. Anyone with that phrase and an additional PIN could take control of the Bitcoin from another device.”

A court filing showed that Larry had more than 4,800 BTC stored in the wallet. Gary, who later acted on the information he received from the hearings, stole 713 from the asset while the government authorities watched.

Posed in a Bathtub of Cash

At first, authorities suspected Larry stole the bitcoin after he was released on bail. However, the suspect revealed to the prosecutors that Gary was the perpetrator.

Gary, who worked for Larry before his arrest, lived on COVID stimulus funds and Ohio’s unemployment benefits after his brother’s arrest in 2020. However, his life quickly swung after the assets disappeared from the evidence locker. He was seen grinning as he lounged in a bathtub full of dollar bills surrounded by scantily clad women. Aside from lavishing the funds on women, Gary used part of the stolen assets (68 BTC) as collateral for a $1.2 million loan.

He used part of the loan to buy luxury condos in Cleveland and was arrested later in July 2021 on money laundering charges with other crimes.

Gary also sought bail, but authorities demanded he release the seed phrase to the stolen bitcoins before he could leave their custody.

His lawyer advised that the condition would force him to admit crimes violating his Fifth Amendment right against self-incrimination. Gary eventually rejected two plea offers and is now ready for a plea agreement slated for next year.

(By William A. Frederick)