On Wednesday, it was announced by the U.S. Department of Justice (DOJ) that a California man, Kais Mohammad, admitted to operating an unlicensed bitcoin ATM network that “laundered millions of dollars of bitcoin and cash for criminals’ benefit.”
The 39-year-old owned and operated an unlicensed bitcoin money service business called Herocoin where he offered to exchange bitcoin for cash, charging commissions of up to 25%, the DOJ detailed.
He advertised his exchange business online using the moniker “Superman29,” but serving clients throughout Southern California. Typically, he met clients at a public location and exchanged bitcoin for them of up to $25,000 without inquiring about the source of their funds.
Two-way bitcoin ATM machines
Md Kais later purchased and advertised a network of two-way Bitcoin ATM machines located in malls, gas stations, and convenience stores in Los Angeles, Orange, Riverside, and San Bernardino counties. The DOJ stated:
Mohammad processed cryptocurrency deposited into the ATM machines, supplied the ATM machines with cash that customers would withdraw, and maintained the server software that operated the machines.
According to the DOJ, Mohammad knew that Herocoin needed to register with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN), but he chose to neither register nor comply with anti-money laundering rules.
He eventually did register after FinCEN contacted him but continued to fail to comply fully with federal law concerning money laundering, conducting due diligence, and reporting suspicious customers as the Justice Department noted.
30 years imprisonment for money laundering
During the course of its investigation, law enforcement conducted multiple bitcoin exchange transactions with Mohammad. He also conducted multiple in-person bitcoin to cash transactions with undercover agents who said their proceeds were from illegal activity.
The DOJ said Mohammad never filed a currency transaction report or suspicious activity report for these transactions. The department added that in the coming weeks, he is expected to plead guilty to federal criminal charges that he operated an illegal virtual-currency money services business that exchanged up to $25 million – including on behalf of criminals – through in-person transactions and a network of Bitcoin ATM machines.
The Justice Department elaborated:
Upon pleading guilty, Mohammad will face a statutory maximum sentence of 30 years in federal prison. As part of the plea agreement, Mohammad has agreed to forfeit cash, cryptocurrency, and 17 bitcoin ATMs that he operated as part of his business.