A Californian man has entered a guilty plea to federal authorities for operating a Bitcoin money-laundering operation.
Kais Mohammad, age 36, operated a rather extensive enterprise that encompassed Bitcoin ATMs and personal trading services to clients he knew were using cryptocurrency to launder illicit gains.
Illegal Bitcoin operation
Mohammad pleaded guilty to money laundering, operating an unlicensed money transmitting service, and failing to have in place an effective anti-money laundering program that is required by law.
Hailing from Yorba Linda, Mohammad’s operation, called HeroCoin, was spread across Orange, Los Angeles, Riverside, and San Bernardino counties in California.
As part of his operation, Mohammad would physically meet with clients and exchange Bitcoin for cash. He would charge up to a 25% commission for such transactions. Authorities state he never inquired about the source of his clients’ funds, although he allegedly knew many times that such money was the result of criminal activities.
He also installed 17 Bitcoin ATMs in malls, convenience stores, and gas stations in the four counties he operated in. Users could buy BTC or sell BTC for hard cash at the ATMs.
Laundry list of illegal activities
Needless to say, Mohammad broke quite a few laws in running his BTC empire. He failed to register HeroCoin with the Treasury Department’s Financial Crimes Enforcement Network. He never gave notice to federal authorities for transactions bigger than US$10,000 [AUS$14,000] or transactions over US$2,000 [AUS$2,800] for clients he suspected were criminals.
He never developed an anti-money laundering program. Another issue was that he never put an identity verification program in place at his ATMs for clients making multiple transactions up to US$3,000 [AUS$4,200]. Finally, he never took steps to verify any identification that was provided by someone using his Bitcoin ATMs.
The business was apparently brisk for HeroCoin. Mohammad confessed to federal authorities that he exchanged between US$15 million [AUS$21 million] to US$25 million [AUS$35 million] at his cryptocurrency ATMs and personal meetings.
The plea deal that Mohammad negotiated results in him giving up the ATMs, money, and cryptocurrency that were part of his HeroCoin operation. His sentencing hearing has not been scheduled, but he does face up to 30 years in federal prison.