Criminal Defense Lawyers

Cryptocurrency Exchange Operator Arrest: Federal Defense Strategy

When Federal Agents Come for Your Crypto Exchange

The FBI doesn’t knock. They announce themselves, show you a warrant, and start seizing your hardware wallets before you’ve finished reading it. Your facing federal money laundering charges for running a cryptocurrency exchange you thought was completely legal. The goverment is claiming you operated an unlicensed money services business, violated the Bank Secrecy Act, and facilitated transactions with sanctioned countries irregardless of wether you even knew where your customers lived.

This is happening right now to exchange operators across the country. November 2025 saw a Chicago founder indicted for $10 million in alleged money laundering. November 2024 brought a 150-month sentence for a darknet exchange operator. But here’s what prosecutors ain’t telling you: charges were completely dismissed against a crypto exchange operator in May 2025, and the Binance CEO who pled guilty got only 4 months when prosecutors wanted 3 years. Then he recieved a presidential pardon in October 2025.

What happens in the next 72 hours will determine everything. Not next week. Not after you “think about it.” Right now.

What You’re Actually Charged With (It Ain’t “Crypto Crimes”)

Look, here’s the deal—your indictment probly mentions the Bank Secrecy Act, operating an unlicensed money services business (MSB), and maybe money laundering under 18 U.S.C. § 1956. You keep searching for “cryptocurrency laws” but that’s not what this is about. There going to prosecute you for banking violations that have existed since 1970, just applied to crypto exchanges.

The Bank Secrecy Act requires anyone who transmits money to register with FinCEN as a money services buisness. It requires you to collect customer information (KYC – know your customer), report suspicious transactions over $10,000, and implement anti-money laundering (AML) programs. Most crypto exchange operators never did this. They thought crypto was seperate from banking. The goverment thinks different.

Based off recent prosecutions, here’s what prosecutors actually charge:

18 U.S.C. § 1960: Operating an unlicensed money transmitting buisness. This is the core charge. It doesn’t require proving you knew you needed a license—strict liability in some circuits. The evidence show you accepted crypto from one person and sent it to another person for a fee, that’s money transmission.

Bank Secrecy Act violations: Failing to register with FinCEN, failing to implement AML programs, failing to file Suspicious Activity Reports (SARs). These are the charges that brought down Binance in their $4 billion settlement. Prosecutors is arguing that running an exchange without these programs is willful blindness—you should of known.

Sanctions violations: This is where sentencing multiplies. If any of your customers was in Iran, Cuba, Syria, North Korea, or Russia (depending on the time period), you violated OFAC sanctions. Even small amounts. The Binance case showed that transactions with sanctioned countries—including terrorist groups like Hamas, al-Qaida, and ISIS—turn a compliance case into a national security case. Prosecutors don’t care if you didn’t check customer IPs. They say you should of.

Here’s what makes this different then fraud cases: intent matters differently. With fraud, they gotta prove you meant to decieve. With BSA violations, they just gotta prove you operated the exchange and didn’t register. Some defendants think “I didn’t know I needed a license” is a defense.

In most circuits, it ain’t.

The statute requires “willfulness” but courts define that as “knowingly doing the act” not “knowing the act was illegal.”

However the May 2025 Pilipis case showed that judges are starting to push back. A federal judge dismissed all charges against a Noblesville exchange operator, finding the goverment’s case fundamentally flawed. That’s the first complete dismissal we’ve seen. It means these prosecutions ain’t automatic wins for prosecutors.

The First 72 Hours – What Happens RIGHT NOW

Real talk: The first three days after arrest or first contact with federal agents will determine wether you spend 4 months or 150 months in prison. Here’s the timeline your going through right now.

Hour 1-4: Initial Contact or Arrest

If FBI or ICE agents showed up, they’re executing a search warrant or arresting you. They will try to “just ask a few questions.” Do not talk to federal agents without an attorney. I don’t care how friendly they seem. I don’t care if they say “we just want your side.” Anything you say will be used against you, and the agents are trained to make you think your helping yourself when your actually building their case.

The evidence collection has probly been going on for months. They already have your transaction records, your emails, your Slack messages with co-founders. What they don’t have is you on tape explaining how you knew customers was in sanctioned countries or how you deliberately avoided compliance.

Don’t give them that tape.

If they ask “do you know why we’re here?” the only answer is “I want to speak with my attorney.” If they say “we can make this easier if you cooperate now,” the answer is still “I want to speak with my attorney.” Cooperation might be the right strategy—but that decision happens after you’ve talked to a lawyer, not in teh first hour.

Hour 4-24: Emergency Asset Protection

This is probly the most critical decision point, and it’s where defendants make fatal mistakes. Asset movements after investigation starts can become obstruction charges. But doing nothing means the goverment seizes everything.

Here’s what alot of exchange operators don’t realize: civil asset forfeiture happens without a conviction. Without even charges filed. The government just needs “probable cause” to beleive your Bitcoin was obtained through or used in a crime. They can file a civil forfeiture action while the criminal case is still being investigated.

According to recent analysis of crypto seizures, civil forfeiture doesn’t require proving you guilty. It’s a seperate legal action against the property itself—United States v. 32.4 Bitcoin—not against you personally. That means even if criminal charges get dropped (like in the Pilipis case), the goverment might still keep your crypto.

You have 72 hours before most assets are frozen. But moving assets now, without legal advice, could create new charges: obstruction of justice, money laundering (yes, laundering your own money), concealment of assets. Defendants have turned misdemeanor cases into felonies by panicking and moving crypto after their first contact with agents.

What you should of done months ago when you first suspected investigation: consult asset protection attorney, seperate business and personal holdings, ensure family assets aren’t commingled. What you can do now: Emergency consultation with counsel who understands both criminal defense and civil forfeiture. They can advise which assets are at risk, which movements are legal, which would be obstruction.

Hour 24-72: Building Your Defense Team

A regular criminal defense attorney ain’t enough. You need someone who’s handled BSA cases, FinCEN enforcement, and cryptocurrency prosecutions specifically. The legal issues are technical—mens rea requirements, strict liability vs. willfulness standards, OFAC sanctions regulations. Your DUI lawyer can’t handle this.

You also need to understand there’s multiple agencies coming. Not just DOJ. FinCEN, DOJ, IRS, OFAC—all seperate. FinCEN can impose civil penalties seperately. The IRS might be investigating tax evasion for unreported income. OFAC handles sanctions violations. If you sold any tokens, SEC might claim securities violations. The BTC-e case showed FinCEN imposed $110 million in civil fines while DOJ pursued criminal charges against the operator.

Settling with one agency doesn’t resolve exposure to the others.

Cost reality: Federal cryptocurrency defense starts at $150,000 and can exceed $500,000 for trial. Most defendants can’t pay this after asset freezes. That’s intentional. The goverment knows freezing assets forces defendants into cooperation or into accepting overworked public defenders. It’s a leverage tactic.

Recent Case Outcomes – Why This Isn’t Hopeless

Prosecutors want you to think everyone loses these cases. They’ll show you the 25-year sentence for Sam Bankman-Fried and say “see what happens when you fight?” But there not telling you the whole story. Recent outcomes show judges are skeptical of prosecutorial overreach, some defendants are winning dismissals, and cooperation is getting people out in months not years.

The Pilipis Precedent (May 2025): All charges dismissed. Federal judge in Indiana looked at the goverment’s case against Maximiliano Pilipis—money laundering and willful failure to file tax returns—and threw it all out. This was a early cryptocurrency exchange operator, and the judge basically said the prosecution didn’t prove their case met the legal standard. The government didn’t even appeal. They just dropped it.

What this means: Prosecutors don’t automatically win. The legal theories there using—applying 1970s banking law to 2015-2020 cryptocurrency exchanges—have gaps. Defendants who fight with good counsel can win dismissals. Bottom line: Don’t let prosecutors pressure you into pleading in 48 hours because “everyone loses at trial.”

The Zhao Sentencing Gap (April 2024): Changpeng Zhao, Binance CEO, faced up to 10 years statutory maximum. Prosecutors asked for 36 months—actually, 3 years. Judge gave him 4 months vs. 150 months. That’s an 89% reduction from what prosecutors wanted. The judge clearly disagreed with the government’s characterization of the severity.

What this means: Judges have independence. They’re not rubber-stamping prosecutor recommendations. Even in a $4 billion settlement involving sanctions violations and terrorist financing, the judge looked at the specific facts—CZ cooperated, he wasn’t personally enriched by the violations, Binance paid massive fines—and gave a sentence more then 90% below what the goverment wanted. If you got a strong cooperation case, judges might be receptive.

The Trump Pardon (October 2025): Then CZ got pardoned. President Trump pardoned him in October 2025, declaring the “war on crypto is over.” Now, you can’t count on a pardon—but it shows the political climate around cryptocurrency enforcement is shifting rapidly. What looked like career-ending prosecution in 2023 resulted in 4 months served and a pardon 18 months later.

What this means: Don’t make irreversible decisions in a changing enviroment. Pleading to 10 years in 2024 would look pretty stupid if pardons start flowing in 2026. Your attorney should be factoring political climate into strategy. Maybe delay sentencing. Maybe take calculated risks at trial that wouldn’t of made sense two years ago.

The Sterlingov Sentence (November 2024): Not all outcomes is good. Roman Sterlingov got 150 months—that’s 12.5 years—for operating Bitcoin Fog, a cryptocurrency mixer on the darknet. This was way harsher then the Binance case, even though Binance processed way more volume.

What this means: What you did matters more then how much money was involved. Darknet mixers, mixing services, anything prosecutors can tie to “anonymizing criminal proceeds” gets treated way worse then regular exchanges that just failed compliance. Sterlingov’s 150 months vs. CZ’s 4 months shows the difference. If your exchange was advertised as “anonymous” or “no KYC,” your in the Sterlingov category and need to adjust expectations.

What Prosecutors ACTUALLY Care About (And What They’ll Deal On)

Here’s the thing—prosecutors say they care about “protecting the financial system” and “preventing terrorist financing.” That’s the press release. What they actually care about, based off sentencing outcomes, is very different. Understanding this shapes your entire defense strategy because it tells you what facts are most dangerous and what facts they might overlook if you give them what they really want.

Darknet and Anonymity Tools: This is what keeps prosecutors up at night. If your exchange was marketed as “privacy-focused,” “no KYC required,” “anonymous transactions,” or operated on the darknet, your in serious trouble. The sentencing data is brutal: CZ got 4 months for a $4 billion compliance failure at a regular exchange. Sterlingov got 150 months for Bitcoin Fog, a mixing service. That’s a 37x difference in sentence for arguably less money involved.

Why prosecutors care: Anonymity tools scare them because they loose the ability to trace funds. Regular exchanges—even unlicensed ones—leave transaction records the goverment can analyze. Mixers and privacy-focused services deliberately destroy that trail. From the prosecutor’s perspective, your not just violating BSA compliance, your actively helping criminals hide proceeds. They treat this like you was a co-conspirator to every crime that used your service.

What this means for you: If your exchange kept records, emphasize that. If you cooperated with law enforcement requests when you got them, emphasize that. If you advertised privacy features, that’s gonna hurt. Your attorney needs to distance you from the “darknet” association immediately.

Show you was trying to build a legitimate business, not a criminal tool.

Sanctions Violations (Iran, Cuba, Syria, North Korea): This is the sentence multiplier. Look at the Binance case—they had AML failures across the board, but what really made headlines was “transactions with designated terrorist groups Hamas, al-Qaida and ISIS” and processing payments from sanctioned countries. That’s what turns a regulatory case into a national security case.

Prosecutors care because: Congress cares. DOJ leadership cares. It makes their case sound important when they can say “terrorist financing” instead of “paperwork violations.” And OFAC sanctions violations carry seperate penalties that stack on top of BSA charges. Each sanctions violation can add years to your sentence.

What this means for you: You gotta know if ANY of your customers was in sanctioned jurisdictions. Even small amounts. Even if you didn’t know. Prosecutors will argue you should of implemented IP tracking, geographic blocking, customer verification. If you got Iranian or Syrian customers who used VPNs to appear American, prosecutors claim that’s your fault for not detecting it. The question ain’t “did you intend to violate sanctions?” It’s “did you have processes to prevent sanctions violations?”

And if the answer is no, your gonna face enhanced penalties.

Strategic consideration: If you had sanctions violations, cooperation becomes way more valuable. Prosecutors will want you to identify the customers, the transactions, how the money moved. They care less about punishing you and more about mapping the network. Your attorney might could leverage this—offer high-value cooperation on sanctions cases in exchange for reduced charges on the BSA stuff.

Dollar Amount Thresholds: Here’s something nobody talks about. The Los Angeles case in January 2025 specifically mentioned the exchange processed “at least $13 million.” That phrasing—”at least $13 million”—suggests it’s above some internal prosecution threshold. Other cases mention $10 million, $32 million, hundreds of millions.

What I ain’t seeing: Prosecutions of exchanges that processed under $5 million total. Might be they happen at state level, might be they don’t happen at all. The cases making federal court is all multimillion-dollar operations.

What this means: If your exchange was small—like under $5 million lifetime volume—you might could argue your not worth federal prosecution resources. Your attorney can point to declinations in similar cases. This don’t mean your safe, it means you got leverage to push for lesser charges or state court instead of federal. The $13 million threshold is probly the floor for cases DOJ wants to prosecute federally, not the ceiling.

Tax Evasion: Almost an afterthought in crypto cases, but it’s there. The Pilipis case included willful failure to file tax returns. FTX charges included tax components. If you made money from exchange fees and didn’t report it, the IRS can seize your Bitcoin seperately from the DOJ criminal case.

Here’s the mute point alot of operators miss: Even if DOJ drops criminal charges (like Pilipis), IRS can still pursue civil penalties and asset seizures for unpaid taxes. Even if you win the criminal case, you might loose your assets to IRS levy. They’re seperate enforcement tracks.

What this means: You need tax counsel in addition to criminal defense counsel. Calculate what you should of paid in taxes on exchange fees, capital gains from holding crypto, etc. You might need to file amended returns while the criminal case is pending. Some defendants think “if I file now, I’m admitting guilt.”

Not true.

Filing corrected returns shows good faith and could reduce penalties, both criminal and civil.

Cooperation Value: What prosecutors really want is the next level up. If you was running a mid-size exchange, they want your suppliers, your customers who was running scams, other exchanges you worked with. If you got information about larger operations, darknet markets, or organized crime groups using crypto, that’s valuable.

The cooperation timing calculation based off recent outcomes: CZ cooperated with a $4 billion case and got 4 months. Sterlingov didn’t cooperate (or had nothing valuable to offer) and got 150 months. That’s the spread. Now, CZ’s cooperation was probably offering up Binance’s records and systems, restructuring the whole company. Your cooperation might be worth less. But the principle stands: If you got valuable information, cooperation can reduce your sentence by 90%+.

What you gotta understand though—and this is crucial—cooperation timing matters. CZ didn’t proactively run to the FBI when he realized Binance had compliance problems. He waited. He got charged. THEN he pled guilty and cooperated. He didn’t give away leverage early. Some defense attorneys will tell you to cooperate immediately at first contact. But if you cooperate before charges are filed, you don’t know what they got, you don’t know what they’re charging, and you can’t negotiate from knowledge.

Strategic approach: Wait until you see the indictment (or at least know what there investigating). Then evaluate cooperation. Exception: If your actually innocent and got exculpatory evidence, providing that early might prevent charges. But if your guilty of the conduct there investigating, premature cooperation just helps them build the case faster.

What They Don’t Care About: Your intentions. How much you beleived crypto was gonna change the world. Your libertarian philosophy. Whether you thought BSA was unconstitutional. None of that matters. Prosecutors ain’t impressed that you was trying to “bank the unbanked” or “create financial freedom.” They see you as someone who made millions violating federal law and claiming ideology as an excuse.

Don’t lead with that in cooperation meetings—it just makes you look unrepentant.

Your Defense Options (and What Each Actually Costs)

So you understand the charges, you know what prosecutors care about, you’ve survived the first 72 hours without making it worse. Now you gotta choose a defense strategy. This ain’t a simple “fight or plea” decision. There’s actually multiple paths, each with different costs, different timelines, and different probable outcomes based off recent cases.

Option 1: Immediate Cooperation

What it is: You plead guilty, provide substantial assistance to the goverment’s investigation of other targets, testify if needed, potentially wear a wire or do controlled buys. In exchange, prosecutors file a 5K1.1 motion asking the judge for a downward departure from sentencing guidelines.

Cost: Legal fees $75,000-$150,000 (less then trial because your not fighting, but you still need counsel to negotiate cooperation agreement and prepare for sentencing). Timeline: 6-18 months from cooperation to sentencing (depends on how long your useful to investigation).

Probable outcome based on recent cases: If your cooperation is valuable (identifying major actors, providing evidence in other cases), you might could get CZ-level outcome—single-digit months even on serious charges. If your cooperation is minor (just confirming what they already knew), maybe 50% reduction from guidelines. Problem is, you don’t know how valuable you are until your already committed to cooperation.

Risks: You can’t uncoop. Once you start talking, your locked in. If prosecutors decide your cooperation wasn’t substantial enough, they can still recommend harsh sentences. You’ve given up your leverage and might not get the benefit you expected. Also, cooperating against business partners or customers creates personal safety risks—people you testify against might retaliate. The goverment provides witness protection only in extreme cases.

Best for: Defendants who have genuinely valuable information about larger targets, who are facing overwhelming evidence (like your already on tape doing what there charging), and who can stomach the personal relationships cost.

Option 2: Negotiated Plea Without Cooperation

What it is: Your attorney negotiates a plea deal where you plead guilty to reduced charges or fewer counts, but you don’t cooperate against others. Sometimes called a “straight up” plea. You accept responsibility, you allocute to what you did, but you ain’t helping them make other cases.

Cost: Legal fees $100,000-$200,000 (more then cooperation because your negotiating harder and maybe preparing for potential trial if negotiations fail). Timeline: 8-16 months typically.

Probable outcome: You’ll get some reduction for acceptance of responsibility (usually 2-3 levels on the sentencing guidelines), but you won’t get the 5K1.1 departure. For mid-level BSA violations without sanctions or darknet elements, maybe looking at 18-36 months. For cases with sanctions violations or large dollar amounts, could be 5-10 years. Judge has some discretion—remember CZ’s judge gave way less then prosecutors wanted even with cooperation.

Risks: If negotiations fail and you go to trial and lose, you face the “trial tax“—prosecutors will recommend way harsher sentence because you made them prove it. Also, you give up the chance for cooperation discount. But you preserve relationships and don’t create personal safety issues.

Best for: Defendants who don’t have information valuable enough to trade, who face moderate charges (not the worst facts), and who want closure without becoming a witness against others.

Option 3: Motion Practice and Potential Dismissal

What it is: Your attorney files motions to dismiss based on legal arguments—statute doesn’t apply to cryptocurrency, government can’t prove willfulness, indictment is constitutionally vague, whatever defenses fit your facts. The Pilipis precedent showed this can work. Judge might dismiss some counts or even the whole indictment if the legal theory is weak.

Cost: $150,000-$300,000 in legal fees (extensive legal research, brief writing, oral arguments). Timeline: 12-24 months of motion practice before you even know if your going to trial.

Probable outcome: Very case-specific. Pilipis got everything dismissed in May 2025. But that’s literally the first complete dismissal we’ve seen in a crypto exchange case. Most motions fail. You might get one or two counts dismissed but still face trial on the rest. However, strong motion practice can pressure prosecutors into better plea deals because they realize there case has holes.

Risks: If motions fail, you’ve spent alot of money and time, and you still face trial or plea. Prosecutors might be less willing to negotiate after you’ve attacked there case in motions. But if motions succeed, you could walk away.

Best for: Defendants with genuinely novel legal issues (like “I didn’t know cryptocurrency was covered by MSB statute” in a circuit that hasn’t ruled on it), defendants who can afford the cost even if it doesn’t work, or defendants using motions as leverage to improve plea negotiations.

Option 4: Trial

What it is: You make the goverment prove every element beyond a reasonable doubt. Jury trial, cross-examination of witnesses, expert testimony about cryptocurrency technology, challenging the evidence.

Cost: $300,000-$750,000+ depending on complexity. Multiple experts, jury consultants, trial prep, weeks of attorney time. This is why most defendants can’t afford trial—especially after asset freezes. Timeline: 18-36 months from indictment to trial typically.

Probable outcome: Conviction rate in federal court is around 90%. But that’s all federal cases, not just crypto. In the cases where defendants had sophisticated counsel and real defenses, outcomes is more variable. The problem is, if you loose at trial, your facing the “trial tax”—judges tend to give harsher sentences to defendants who made the goverment prove it. You’ve spent $500K, lost the trial, and now your facing 20 years instead of the 5 years you could of pled to.

On the other hand, if you win, you walk. And if the goverment’s case is weak (like apparently Pilipis’s was), they might dismiss before trial once they realize discovery ain’t gonna support their theory.

Risks: Financial and personal catastrophe if you lose. Even if you win, you’ve spent years of your life and hundreds of thousands fighting. But if your actually innocent or if the case is fundamentally flawed, trial might be the only way to avoid a criminal record.

Best for: Defendants who are actually innocent, defendants with weak government cases (limited evidence, legal theory problems, witnesses with credibility issues), or defendants facing such harsh sentences that the trial penalty don’t matter—like if your facing life anyway, might as well try.

Option 5: Hybrid Strategy (the smartest play for alot of defendants)

What it is: You don’t immediately commit to one path. You engage in motion practice to test the strength of the goverment’s case and improve your negotiating position. You cooperate on limited issues (like explaining how cryptocurrency technology works) without becoming a full cooperating witness. You keep the option of trial open while simultaneously negotiating plea deals. You wait to see how political climate evolves (remember, CZ got pardoned 18 months after sentencing).

This is kinda like playing poker while showing some cards but not all. You give prosecutors some cooperation to build goodwill, but you preserve your leverage. You file strong motions to show your willing to fight, but you signal openness to deals. You delay strategically—maybe the Trump administration’s “war on crypto is over” policy translates into more dismissals or pardons.

Cost: Probably $200,000-$400,000 total because your doing motion work AND plea negotiations AND cooperation prep, but hopefully resolving before actual trial. Timeline: 18-30 months.

Probable outcome: At the end of the day, you probly end up with a better plea deal then you would of gotten by immediately accepting prosecutors’ first offer. Maybe you get some counts dismissed through motions, then plead to what’s left with partial cooperation credit. Maybe the political climate changes and prosecutors become more willing to deal. Maybe new case law comes out that weakens there legal theory.

Best for: Defendants with resources to sustain 2+ years of legal fees, defendants with facts that aren’t the worst but aren’t great, defendants who can handle uncertainty and strategic pivots.

The Asset Freeze Problem: All of these options assume you can pay legal fees. But in most crypto cases, the goverment has frozen your assets. You can’t access the millions sitting in your cold wallet because it’s subject to restraining order. Your bank accounts is frozen.

How do you pay $300,000 in legal fees?

Some options: Family loans. Selling assets that wasn’t frozen (like a house, if the goverment didn’t put a lien on it). Attorneys who take payment plans or partial contingency (rare in criminal cases but some do it). Court-appointed counsel (public defenders or CJA panel attorneys—they’re often overworked but some are excellent in crypto cases).

What you can’t do: Access the frozen crypto. Trying to move frozen assets creates new obstruction charges. Some defendants try to access crypto through family members or foreign exchanges, thinking the goverment won’t find out.

They always find out.

Then your facing additional charges and your looking at prison time even if the underlying case was weak.

Call Right Now – Before Your Assets Disappear

Your facing federal charges that could take decades of your life. Irregardless of what you beleive about cryptocurrency regulations, the goverment is prosecuting exchange operators right now. You don’t have time to “think about it” or “see what happens” or wait until arraignment to get counsel.

Every hour without a lawyer is another hour agents are interviewing witnesses, seizing records, and freezing assets. To long without protection and you’ll loose everything before you even understand what your charged with.

Don’t loose this because you waited.

We handle federal cryptocurrency prosecutions. We’ve seen the dismissals. We know the cooperation strategies. We understand the technical defenses.

Call now. Right now. Not tomorrow.

We’re here. 24/7.