How does that work? Does I transfer a bunch of "ill gotten" ethereum to someone who agreed to buy my 5k goofy ape NFT for 1 million bucks and now I've made 995k that I can pay taxes on and use as laundered money? There's still a transaction chain of eth so it wouldn't be impossible to figure out what I just tried to do.

You start a ransomware group, you take the country of Belize for a million in etherium. You also start a NFT collective, you post a bunch of pictures you have for sale. In a fit of 'we're gonna blow this money', the ransomware group, which is you, buys a bunch of NFTs from a few NFT sellers, including the NFT group you setup. The group posts the JPGs on their twitter to show what they "wasted" their money on for lols.

Can the country of Belize claw back their money? It depends where you live, where your NFT collective lives, and the treaties between the countries. If you chose your countries correctly to ransomware. If Eth is fungible currency, then you can claim that just because the 'money' someone stole ended up with you, for a legitimate sale, its not a 'stolen good'.