The Great Bitcoin Jailbreak

Feds seized a storage device full of ill-gotten tokens. And then someone started stealing them

Gary Harmon grinned as he lounged in a bathtub full of dollar bills surrounded by scantily clad women. The moment, captured in a photo on his cellphone, could be part of his undoing. To US prosecutors, it’s evidence that he suddenly came into a lot of money.

The prosecutors accuse Harmon of a very unusual crime: remotely swiping Bitcoin stored on a computer device the government had already seized in another case, brought against his older brother, Larry. As authorities watched helplessly, 713 digital tokens—then worth almost $5 million—were somehow spirited away from the “hardware wallet” they were holding in an evidence locker.

Larry Harmon, who’s since pleaded guilty to laundering $311 million through crypto transactions, swore up and down he wasn’t involved in the disappearing act. Instead, Larry, 39, pointed the finger at Gary, 30, and ultimately helped to nail him. Gary is in federal jail in Washington, D.C., awaiting trial, and Larry is free on bail near Akron. The cases of the Harmons—literal crypto bros— show how the IRS and the FBI are succeeding in collecting evidence but still face challenges on the blockchain frontier. Authorities had to track digital money moving through a tangle of anonymous accounts to connect it to Larry. When they tried to seize it, they faced a problem: How do you put a fence around a quicksilver asset such as Bitcoin?