The FBI secretly funded and directly engaged with drug traffickers and hackers, including members of the notorious Scattered Spider cybercrime group, as part of an undercover crypto money laundering sting, according to new details reported Tuesday by 404 Media, citing court documents.

Federal authorities ran the Elon Musk-themed money laundering scheme undercover for nearly a year after arresting its original operator, Indian national Anurag Pramod Murarka, 30, who was sentenced in January to 10 years in prison on charges of conspiracy to commit money laundering.

During the year-long undercover operation, federal agents prevented an additional $1.4 million from being laundered by posing as Murarka, court documents show.

Murarka previously used the aliases “elonmuskwhm” and “la2nyc” to receive crypto from drug traffickers and hackers, converting digital assets into cash through a complex hawala network—an informal money transfer system illegal in multiple countries.

Murarka advertised money laundering services on darknet marketplaces from April 2021 to September 2023 and used encrypted communications with clients, directing them to send crypto to specific wallets.

In January, the U.S. Department of Justice said over $20 million was laundered through the operation. 

After the FBI began investigating Murarka, authorities lured him into traveling to the U.S. by approving his visa application. 

Upon his arrival, he was arrested, allowing the FBI to take over the illicit enterprise, which was operated via a "shed-sized" post office in Kentucky, per the report.

Under FBI management, the undercover operation continued to process crypto payments and track cash deliveries to Murarka’s U.S.-based associates.

Criminal proceeds were hidden in envelopes and children's books as part of the scheme, court documents show, Decrypt previously reported.

Under federal law, Murarka is required to serve a minimum of 85% of his prison term, followed by three years of supervised release.

Edited by Sebastian Sinclair