A bitcoin ATM operator was sent to federal prison for two years for carrying out an illegal cryptocurrency exchange operation. US authorities seized 17 bitcoin ATMs, as well as some cryptocurrencies, including bitcoin.
Illegal Bitcoin ATM operator sent to jail
The US Department of Justice (DOJ) announced Friday that a Californian, Kais Mohammad, had been sentenced to two years in federal prison “for operating an illegal ATM network that laundered bitcoins and money for criminals ”.
The Justice Department said the 37-year-old operated an illegal crypto business “which traded as much as $ 25 million”, some “on behalf of criminals via in-person transactions and a network of kiosks. bitcoin ATM type ”.
Yorba resident Linda pleaded guilty in September last year to “a three-count criminal investigation accusing him of operating an unlicensed money transfer, money laundering and failing to have an effective anti-money laundering program in place, ”the DOJ described, adding:
Mohammad agreed to confiscate 17 bitcoin ATMs, $ 22,820 in cash, 18.4 bitcoin, and 222.5 ethereum cryptocurrency from the government.
Mohammad owned and operated Herocoin from December 2014 to November 2019 using the nickname “Superman29”. Herocoin was a cryptocurrency exchange that charged commissions of up to 25%, which was “significantly higher than the going market rate,” the DOJ noted.
He usually met his clients in a public place and exchanged currencies for them. “Mohammad generally did not inquire about the source of client funds and on some occasions knew that the funds were the product of criminal activity. Mohammad knew that at least one Herocoin client was engaging in illegal dark web activity, ”the Justice Department said.
Mohammad also processed cryptocurrency deposited in bitcoin ATMs, provided the machines with cash for customers to withdraw, and maintained the server software that operated the machines.
The Justice Department said Mohammad “intentionally failed to register his business with the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN)” even though he was aware of the registration requirement. He also “chose not to … develop and maintain an effective anti-money laundering program, file currency transaction reports for currency exchanges over $ 10,000, exercise due diligence reasonable to customers and file suspicious activity reports for transactions over $ 2,000 involving customers known to him. , or had reason to suspect, were involved in criminal activity, ”the DOJ detailed, adding:
As for his bitcoin ATM network, Mohammad’s machines allowed customers to make financial transactions without requiring ID and customers to make multiple back-to-back transactions of up to $ 3,000 each without ever reporting. suspicious activity to regulators or law enforcement.
FinCEN contacted Mohammad in July 2018 and he subsequently registered with the regulator, but “continued to fail to fully comply with federal law regarding money laundering, conduct of due diligence and reporting suspicious customers, ”according to the DOJ.
Mohammad also made several in-person transactions with undercover agents, helping them exchange money for bitcoin. Officers said they worked at a karaoke bar that employed Korean women who entertained the men in a variety of ways, including engaging in sexual activity. “Mohammad never filed a currency transaction report or suspicious activity report for these transactions,” the DOJ said.
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