Father, Son Sentenced For Cannabis Business, Money Laundering

A father and son duo have received sentences for their roles in a money-laundering scheme and an illicit multi-million-dollar cannabis business in Monroe, Washinton.

On Tuesday, May 31, the United States Drug Enforcement Administration announced five-year prison sentences for 47-year-old Kenneth John (KJ) Rhule and 28-year-old Kenneth Warren Rhule (KW).

DEA says the court charged KW with conspiracy to manufacture and distribute marijuana and money laundering instruments.

KJ received charges for conspiracy to manufacture and distribute marijuana.

State and local law enforcement agencies assisted DEA and Homeland Security Investigations in the case.

Assistant United States Attorneys Philip Kopczynski, Casey Conzatti, and Krista Bush prosecuted the case.

U.S. District Court Judge John C. Coughenour justified the length of both sentences, noting the size of the illicit enterprise and the presence of firearms.

“Not only did this pair produce and distribute marijuana products on the dark web, in violation of the state’s regulatory scheme, they also illegally laundered immense amounts of Bitcoin that their enterprise earned,” says U.S. Attorney Nick Brown. When law enforcement moved in, there were more than a dozen firearms—some loaded and ready to be used to protect their drug trade.”

The Investigation

Law enforcement learned of KW’s money laundering after discovering that a person with the Gimacut93 screen name was running an unlicensed Bitcoin exchange business.

DEA says KW repeatedly met with an undercover agent at various locations, but most interactions were at a Starbucks in Western Washington.

According to DEA, the agent posed as a criminal who needed to launder money.

DEA says the agent made it seem like his laundering needs were related to human trafficking operations.

According to a DEA press release, KW agreed to trade Bitcoin for cash, knowing the source of the money.

Additionally, DEA says KW explained to the agent how to hide the source.

DEA says KW did not ask the agent the required questions under the Know Your Customer rule

Ultimately, KW exchanged $142,000 in Bitcoin for cash with the undercover agent.

While KW was busy with the money-laundering operation, he and his father also operated an unlicensed cannabis business in Washington state.

During operation, the business did not pay taxes.

DEA says the Monroe-based facility produced hash oil and other cannabis products under HerbinArtisans, Heady.Watr, KlearKrew, and other brand names.

A review of electronic messages revealed that the Rhules accepted cash and cryptocurrency from customers across the country for cannabis products.

DEA says the investigation revealed $13 million in sales through the business with a $2.5 million net profit.

“The state has set up a regulatory framework to serve many important purposes, including ensuring the safety of those who produce and consumer (sic) marijuana products,” stated the prosecution. “The state is also, of course, entitled to tax the marijuana industry. Yet the defendants ignored all this. Perhaps, as is so often true in fraud cases, they were motivated by simple greed. But in running their business in this way, they put a lot of people at risk and disadvantaged others in the industry who chose to play by the rules.”