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29 March 2024
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Money laundering with Bitcoin, sentenced to prison

An activity of money laundering converted into Bitcoin , for $ 25 million, has cost its creator two years in prison. In fact, in recent days a man from Orange County (California) was sentenced to 24 months in prison for operating illegally with Bitcoin ATMs.

The man, Kais Mohammad , also known as “ Superman29 ”, 37, is a former bank employee.

As explained by the US Department of Justice , he pleaded guilty in September 2020. His charges are related to operating unlicensed financial businesses and laundering money. For this he returned 17 Bitcoin ATMs to the State , $ 22,820 in cash, 18.4 Bitcoin (at current value, corresponding to about $ 662,000) and 222.5 Ethereum (today equal to about $ 556,000). 

Herocoin, so was money laundering with Bitcoin

The “Superman29” business was called Herocoin , and it was a Bitcoin trade that ran until August 2019. It had set up both kiosks to buy and sell Bitcoin via ATMs, with operations up to $ 25,000. But most of all, he  met his clients in person , and transferred Bitcoin to them for cash, with commissions equal to 25% of the price , a rate that, according to the Justice Department, was well above the average market commission.

What the authorities objected to the 37-year-old is the fact that he never conducted anti-money laundering procedures and in at least one case he was aware that the money traded came from illegal activities on the dark web. 

Its ATMs, on the other hand, while allowing operations up to $ 25,000, did not require users to comply with AML or KYC procedures. In fact, the transactions were anonymous. 

According to the authorities, up to the moment of the closure of the activities, Herocoin has exchanged Bitcoins for a value between 15 and 25 million dollars, both in interpersonal exchanges and via ATM. 

Unfortunately for its founder, he conducted a Bitcoin exchange with an undercover agent in August 2019, and this was likely his last transaction.

Kais Mohammad had even been contacted by FinCEN to regularize his business, and although he had registered it, he had continued to fail to enforce anti-money laundering procedures. 

Prosecutors wrote in their sentencing memorandum:

“Rather than using his knowledge to create a robust compliance program, he avoided one altogether and took advantage of making his business an efficient, uncontrolled and near-anonymous conduit for money laundering and other crimes . 

This ruling confirms that the authorities are very attentive to Bitcoin in particular for the risks of money laundering from illicit activities. It also confirms that it is difficult to get away with it and that the penalties can be very severe. 

News Source

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