A Bitcoin ATM operator was sentenced to two years in federal prison for conducting an illegal cryptocurrency exchange operation. 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, was sentenced to two years in federal 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 was “on behalf of criminals through personal transactions and a network of Bitcoin ATMs.”
The resident of Yorba Linda pleaded guilty in September last year of “having three headings of 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, adding:
Mohammad has agreed to forfeit 17 bitcoin ATMs, $ 22,820 in cash, 18.4 bitcoin and 222.5 Ethereum cryptocurrency with 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 origin of the clients’ funds and knew on certain occasions that the funds were the proceeds of criminal activity. Mohammad knew that at least one herocoin client was involved in illegal activities on the dark web, ”said the Justice Department.
Mohammad also processed cryptocurrencies that were deposited into Bitcoin ATMs, supplied 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 company with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN),” despite being aware of the registration requirement. He also “determined not to develop and maintain an effective anti-money laundering program, file currency transaction reports for currency exchanges over $ 10,000, perform customer due diligence, and file reports of suspicious activity for transactions over $ 2,000 in which Involved customers he 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 the need for identification and enabled 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 he then registered with the regulatory authority, but according to the DOJ “still not fully complied with federal law on money laundering, due diligence and reporting of suspicious customers”.
Mohammad also conducted several in-person transactions with undercover agents, helping them convert cash into bitcoin. The agents said they worked in a karaoke bar that employed Korean women entertaining men in various ways, including sexual activities. “Mohammad never filed a currency transaction report or a report of suspicious activity for these transactions,” the DOJ said.
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