Then consider that most of the transactions processed by the fog came from places like silk road.
The law doesn't require you to know affirmatively that the service is only used for benign purposes. Just about every public service in existence probably gets used to support illegal activity at some point or another. You just can't be knowingly assisting with a crime.
Every crypto"currency" utilizing a transaction fee is a negative sum game and those are scams. That's all there is.
They may have avoided collecting identifying information on specific individual people, but it's absurd to think that they could have reached the scale they did with no knowledge of where and for what purpose their service was being used.
The startup engineer's fantasy is that you can build something useful and users will flock to it through no further involvement of your own, but that's almost never a thing -- and certainly not here.
The affidavit[1] another user linked elsewhere in this thread says:
> BITCOIN FOG was publicly advertised on Internet forums and well-known web pages promoting darknet markets as a tool for anonymizing bitcoin transactions.
But it doesn't really go into detail. "well-known web pages promoting darknet markets" might just mean "Reddit".
And I think you might be underestimating the impact of word-of-mouth advertising. I don't recall Tor or Mullvad having to extensively advertise to criminals in order to get as popular as they are now.
[1]: https://storage.courtlistener.com/recap/gov.uscourts.dcd.230...
Not a lawyer, but as far as I know its only criminal if you know or at least have a strong reason to believe you're participating in a money laundering scheme. That wouldn't apply to a privacy service that has legitimate uses, particularly an automated one where there's no opportunity to use common sense to reason about which customers are legit.
Anyone operating a crypto mixer knows that people will endeavor to use it to illegally launder funds, and to as I understand it if you know that, you have to implement _effective_ methods to prevent that illegal mixing. It does not matter that there are legal transfers, you have a legal duty to not carry the illegal ones, and if you are not actively trying to prevent those illegal transfers you are liable.
A more day-to-day analogy would be that it is illegal to knowingly buy, sell, or accept stolen property. If you do buy stolen property but there's no reason for you to have thought it is stolen you haven't done anything wrong (though the purchase or sale is invalid, so you've lost the money). If however police can show that you knew or could reasonably know the property was stolen it they could chose to charge you with a crime, and your defense would presumably be some variation of why it was reasonable for you to believe the property was not stolen.
The problem is specifically that everyone running a mixer knows that people attempt to launder their funds through mixers, and so therefore should have mechanisms in place to ensure that they are not accepting transfers that can reasonably related to criminal enterprises, just as you would have to when buying/selling property in the real world. Given that most crypto is trivially auditable there are very few arguments that would support not having at minimum automated rejection of transactions involving any known wallet, and moreover constantly updating the list of known bad addresses.
Certainly if I were on a jury, and the person running the mixer could not show their reasonable actions to prevent laundering, that the system was constantly tracking, updating, and expanding the disallowed wallets precisely because that can be done almost entirely automatically, that would count against their claims to not be intentionally supporting laundering.
Again, the issue here is not running the mixer, it's not that occasional illegal transactions go through - that's unavoidable - it's the failure to take reasonable steps to stop plausibly illegal transfers. The way banks handle this is they block suspicious transactions pending receipt of the actual sender and recipient, and documentation of the origins of the funds. Which is what a mixer would need to do.