MONROE — A father and son were sentenced to five years in federal prison Tuesday for running an illegal, multimillion-dollar marijuana business as part of a Bitcoin money laundering scheme.
Kenneth Warren Rhule, 28, first caught the eyes of federal investigators in April 2018. Someone with the screen name Gimacut93 was advertising unlicensed Bitcoin sales for cash, according to a complaint filed in U.S. District Court in Seattle. By the end of the year, an undercover agent posing as a criminal had paid Rhule or an associate $142,000 in Bitcoin transactions at coffee shops in King and Snohomish counties.
During the in-person meetings, Rhule didn’t ask any required “know your customer” rules, as required to comply with money-laundering laws. In fact, the defendant made deals with the federal agent even after being told the cash was partly proceeds from human trafficking that needed to be laundered. In June 2020, the undercover agent told Rhule they were working with contacts in Ukraine to traffic women into the United States.
At the same time, Rhule and his father, Kenneth John Rhule, 47, were operating an unlicensed marijuana business in Monroe that paid no state taxes, according to court documents. The company used the names HerbinArtisans, Heady.Watr and KlearKrew. The father and son sold their marijuana products nationwide in exchange for cash or cryptocurrency.
When federal law enforcement searched the Rhules’ processing facility in 2020, they found hundreds of kilograms of marijuana and a stockpile of chemicals to create THC extractions, according to court papers. They also found more than a dozen firearms, including a loaded handgun atop a safe containing $42,000 in cash at the son’s home.
The investigation found the business made over $13 million in sales and $2.5 million in net profit, prosecutors alleged.
In February 2020, the son was charged with six counts of laundering money instruments, one count of conducting an unlicensed business and one count of conspiracy to manufacture and distribute marijuana. Charges for his father followed months later.
Earlier this year, they both pleaded guilty. The son pleaded guilty to money laundering and conspiracy to manufacture or distribute 100 kilograms or more of marijuana; the father to a marijuana conspiracy charge.
In court filings, prosecutors pushed U.S. District Court Judge John Coughenour in Seattle to sentence Kenneth Warren Rhule to seven years and his father, Kenneth John Rhule, to 6½ years. The father’s defense attorney argued a punishment of time served would be sufficient.
Noting the size of the enterprise and the guns, Coughenour decided on five years for each, according to a news release.
In court documents, the father’s defense attorney wrote that Kenneth John Rhule is now a “chastened middle-aged man who is ashamed of his actions and hoping for a chance to make up for wrongs and for an opportunity to try to reclaim his reputation.” And in a letter to the judge, the father wrote, “I will be a good, law-abiding citizen going forward.”
“More importantly, I will try to set a good example for my children and grandchildren,” he wrote, “something I have clearly failed to do in the matter at hand.”
Jake Goldstein-Street: 425-339-3439; jake.goldstein-street@heraldnet.com; Twitter: @GoldsteinStreet.
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