A Bitcoin ATM operator was sent to federal prison for two years for conducting an illegal cryptocurrency exchange. The US authorities have 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 on Friday that a California man, Kais Mohammad, had been sentenced to two years in prison “for running an illegal ATM network that laundered bitcoin and cash for criminals.”
The Justice Department said the 37-year-old ran an illegal crypto business “that exchanged up to $ 25 million,” some of which were run “on behalf of criminals through personal transactions and a network of Bitcoin ATMs.”
Yorba Linda resident pleaded guilty in September last year to “three-digit criminal information accusing him of running an unlicensed money transfer business, money laundering and failure to maintain an effective anti-money laundering program,” the DOJ described added:
Mohammad has agreed to forfeit 17 bitcoin ATMs, $ 22,820 in cash, 18.4 bitcoin and 222.5 Ethereum cryptocurrency to the government.
Mohammad owned and operated herocoin from December 2014 to November 2019 under the nickname “Superman29”. Herocoin was a crypto exchange business that charged commissions of up to 25%, which was “well above the prevailing market price,” the DOJ noted.
He usually met his customers in a public place and exchanged money for them. “Mohammad generally did not inquire about the source of the clients’ funds and on certain occasions he knew that the funds came from criminal activity. Mohammad knew that at least one herocoin customer was involved in illegal activities on the dark internet, ”said the Justice Department.
Mohammad also processed cryptocurrency deposited at Bitcoin ATMs, supplied the machines with cash so customers could withdraw, and maintained the server software that operated the machines.
The Justice Department said that Mohammad “intentionally failed to register his company with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN),” despite being aware of the registration requirement. He also chose not to develop and maintain an effective anti-money laundering program, filing transaction reports for currency exchange deals over $ 10,000, due diligence to clients and filing suspicious activity reports for transactions over $ 2,000 involving clients he was involved in knew or had reason to believe they were involved in criminal activity, “the DOJ explained, adding:
Regarding its Bitcoin ATM network, Mohammad’s ATMs enabled customers to conduct financial transactions without identification and customers to conduct multiple consecutive transactions of up to $ 3,000 each without ever reporting suspicious activity to regulators or law enforcement agencies.
FinCEN contacted Mohammad in July 2018 and then registered with the supervisory authority, “but still did not fully comply with the federal law on money laundering, due diligence and reporting of suspicious customers,” according to the DOJ.
Mohammad also conducted several in-person transactions with undercover agents to help them convert cash into bitcoin. The agents revealed that they worked in a karaoke bar that employed Korean women entertaining men in various ways, including sexual activity. “Mohammad never filed a currency transaction report or a suspicious transaction report for these transactions,” the DOJ said.
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