From Stripe to Bitcoin: Card Fraud Case Results in Jail Time

Unauthorized Card Payments Funded Bitcoin Transfers

A scheme that converted unauthorized card payments into bitcoin has resulted in a 51-month federal prison sentence. The Department of Justice (DOJ) announced the sentence and restitution order on Oct. 23 for Timothy Wadsworth, 35, of Rochester, New York, following his conviction for conspiracy to commit wire fraud and money laundering.

Using account numbers supplied by co-conspirators, Wadsworth attempted 310 payments totaling $1,673,578 through Stripe, which processes card payments for businesses. Between March 10 and May 15, 2020, 116 initially succeeded, totaling $730,728.22. The department stated:

“The account holders did not authorize the transactions.”

His guilty plea to conspiracy to commit wire fraud and money laundering documented transfers from Stripe to accounts he controlled at HSBC, an international bank, and Evolve Federal Credit Union, a member-owned financial institution. From there, he moved a portion of the money to Coinbase.

Through crypto exchange Coinbase (Nasdaq: COIN), Wadsworth purchased bitcoin and sent it to co-conspirators. These bitcoin transfers to external addresses record changes in control of funds on the network’s public ledger. Transactions in the payment-to-crypto sequence often exceeded $10,000.

Restitution and Forfeiture Follow Multiple Fraud Schemes

U.S. District Judge Frank P. Geraci Jr. ordered Wadsworth to pay $810,965.19 in restitution and forfeit $810,956.19 in wire fraud proceeds. His schemes from March 2020 through September 2021 involved approximately $2.06 million in combined actual and intended losses.

False applications generated $161,200 through the Economic Injury Disaster Loan program, which supported businesses’ operating expenses during the pandemic. Two Paycheck Protection Program loans, intended to support payroll and other eligible expenses, paid $20,833 and $20,416. He also fraudulently received approximately $65,896 in unemployment benefits.

A separate romance scheme directed a recently widowed woman’s $42,000 wire payment into Wadsworth’s account in March 2020. Someone posing as an oil rig worker had requested travel money. Six other victims lost $26,000 through his schemes.

Other Cases Connect Conventional Payments With Crypto

Earlier prosecutions have also traced conventional fraud proceeds into cryptocurrency purchases, including a British voucher fraud case reported in 2021. A teenager bought cryptocurrency with proceeds from a counterfeit shopping website; police later seized more than 48 bitcoin.

Federal warnings about government impersonation payment schemes describe another route involving cryptocurrency ATMs, bank wires, and cash couriers. Scammers posing as officials induce victims to move funds under false claims that their money needs protection.

An Oct. 21 sentencing involving bank accounts and cryptocurrency laundering concerned approximately $14.5 million in drug proceeds converted into USDT, a dollar-linked stablecoin. Intermediaries exchanged tokens for dollars routed through U.S. shell companies to Colombia.