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Major kratom importer’s guilty plea stirs questions

“My question is, is there more going on,” an expert in money laundering said. “How was all this money allowed to leave? Did the banks do their due diligence?”

(CN) — A California man whose companies grossed more than $60 million selling the botanical supplement kratom has pleaded guilty in federal court in California to illegal importation, and faces up to two years in prison at his Oct. 6 sentencing. 

Sebastian Guthery, whose Linked-In profile says he “founded or co-founded over 15 different companies totaling millions of dollars in sales and annual revenue," agreed to the plea deal on July 10, according to a Justice Department press release. Guthery’s company, Nine2Five LLC, also pleaded guilty to money laundering. It appears to be the first criminal money laundering conviction for illegally importing kratom into the United States. 

“This should put the kratom industry on notice,” Tyler Hatcher, Special Agent in Charge of IRS Criminal Investigation Los Angeles Field Office, said in the announcement. “Illegally importing products into the United States for your own financial gain is a crime and disregarding U.S. import laws and import alerts will not go unnoticed, you will be held accountable.”

Hardly anyone noticed — only a few San Diego-area websites reported the announcement.

But the case affords a rare look inside a shadowy industry and the federal government’s fitful efforts to rein it in. It also raises questions. 

According to the plea deal, Guthery will not be fined or face asset forfeiture as is typical in federal money laundering cases. 

“My question is, is there more going on,” says Suzanne Lynch, professor of practice - economic crime at Utica University in New York and an expert in money laundering. “How was all this money allowed to leave? Did the banks do their due diligence?” 

Assistant U.S. Attorney Melanie Pierson, who prosecuted the case in the Southern District of California, has an answer of sorts. “Sadly, the rest of that isn’t public," she said. "It's more complicated.”

Sebastian Guthery poses at a 2017 event sponsored by Eden's Ethnos. (Image courtesy of via Courthouse News)

Kratom is a tree native to Indonesia related to the coffee plant. Its bitter-tasting leaves have been ingested for pain relief and to promote stamina for hundreds of years in Southeast Asia. In the United States, it is sold online and in gas stations and smoke shops in powder, capsule and concentrated liquid “shots.” Some sellers illegally market it as an elixir that cures everything from sexual dysfunction to Covid-19. Millions of users swear it alleviates chronic pain, helps them work out longer and harder or staves off withdrawal symptoms from opioids. 

It’s also addictive and can cause health problems including seizures, liver damage and death in some users, according to the U.S. Food and Drug Administration, which in 2014 issued an “Import Alert,” essentially banning its importation into the United States.

In 2016, the FDA recommended kratom be criminalized as a Schedule 1 drug, alongside heroin.

Guthery has been a major figure with a flashy profile in the kratom subculture, showing off a fleet of exotic cars (including a McLaren and a Ferrari 458 Spider), staging galas and posing with models on social media. In 2015, he was a founding funder of the American Kratom Association (AKA), a non-profit advocacy group that rallied kratom users to beat back the FDA’s effort to outlaw kratom, and has since pushed model legislation to fully legalize and lightly regulate the drug which — once snuck through customs — remains legal to sell in 44 states. 

Courthouse News published a four-part investigation last year detailing eight overdose deaths from kratom and examining the AKA’s multimillion-dollar effort to undermine the FDA and downplay kratom’s addiction and overdose potential. Since then, grieving families have filed at least seven more wrongful death lawsuits claiming their loved ones overdosed on the drug.

Guthery appears to be the first person criminally charged with laundering money made through the importation of kratom, though others have earned federal prison time for selling it via illegal claims about its efficacy as a drug, and the few state prohibitions have sometimes hit even harder. 


In 2019, 36-year-old Matthew Dailey of Royal Oak, Michigan, was sentenced to two years in prison and forfeited $1 million for importing kratom and marketing it for the treatment of “serious diseases and medical conditions,” according to the Justice Department. This past fall, an Arkansas man named Marshall Ray Price, 46, was convicted in state court for possession of kratom and sentenced to 10 years, only to be beaten to death in the Greene County Jail a few weeks later. State police are investigating.

Guthery’s initial indictment, filed under seal this past February, included 15 counts and sought forfeiture of $17 million. Each money laundering count carries a maximum sentence of 20 years. 

Undated photo of Sebastian Guthery with what he describes on his blog as the "Kratom Dream Team." (Image courtesy of via Courthouse News)

According to briefs and motions filed in federal court, the case started in 2018 with the Internal Revenue Service investigation into Guthery and Nine2Five LLC. The agents learned that Guthery’s money came from selling kratom imported into the country falsely labeled as fertilizer, green tea, dye and other products. They bought kratom from him online and traced an array of more than 25 shell companies and 50 bank accounts at Bank of America, Wells Fargo, JPMorgan Chase, Bank of The West, Citi and others, channeling money from kratom sales in the U.S. to suppliers in Indonesia.

Guthery sold the stuff over the internet through trade names like “Kratom-K,” “BuyKratomBulkUSA,” “GreenLeafKratom,” “KratomSourceUSA” and others based mostly in and around Carlsbad, California.

Business boomed.

In examining bank records, the IRS agents found that Nine2Five LLC dba Eden’s Ethnos moved $92,000 through Bank of America in four wire transfers on April 20, 2016, for example, then $116,000 in three transfers the next day. The numbers increased over time. By November 2017 he was wiring nearly $400,000 on some days. On Aug. 7, 2018, the company sent $800,000 in three wires.

“Over the course of the conspiracy, defendants grossed more than $67 million from the unlawful importation and sale of kratom,” prosecutors said in a trial brief. Court filings also alluded to rampant drug use by Guthery and his employees, and the overdose death of Guthery’s girlfriend in the Nine2Five office.

“In December 2016, Guthery provided his former girlfriend with kratom, which she ingested, and then died within hours,” one prosecution brief said, adding that the medical examiner’s report determined “acute polydrug intoxication from the combined effects of lorazepam, mitragynine (compound made from kratom), oxycodone and oxymorphone.”

Guthery’s lawyers fought to exclude these and other alleged facts from the case, saying they could inflame the jury. There was more wrangling over the section of the law under which Guthery was charged, and the burden of proof required for prosecutors to claim the kratom would not have gotten in if it were not falsely labeled. A hearing on motions involving discovery and other matters on July 5 was followed a day later by the plea agreement, in which all but one count from the indictment — for importing nearly 22,000 pounds of kratom mislabeled as “Flora Food Botanical Soil Conditioner” — was dropped.

The plea deal recommended no fine because the defendant has “limited financial prospects.” Guthery is also off the hook for the original income tax irregularities dating from 2014-2018. 

“He’s not living in the U.S. anymore so his assets are elsewhere,” Pierson, the federal prosecutor, said. She can’t say if Guthery’s case should worry other kratom importers. “Each case has to live and die on its own facts,” Pierson said. “I didn’t look into the world of kratom. I looked into the facts of this case.”

Guthery’s lawyer, Andrew Phillip Young of Barnes and Thornberg in San Diego, said kratom vendors should pay attention. “The government has suggested that the industry is on notice,” he said. “And I take them at their word that they are increasingly targeting people and companies in this business.” 

Undated photo of Sebastian Guthery from travels to Indonesia. (Image courtesy of via Courthouse News)
Categories / Business, Criminal

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