Money laundering with Bitcoin, sentenced to prison
A money-laundering operation involving 25 million dollars in bitcoin has cost its creator two years in prison. In recent days, a man from Orange County (California) has been sentenced to 24 months in prison for illegally operating 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 relate to operating unlicensed financial businesses and laundering money. For this, he returned to the state 17 Bitcoin ATMs, $22,820 in cash, 18.4 BTC (at today’s value, corresponding to approximately $662,000) and 222.5 ETH (corresponding to approximately $556,000 today).
Herocoin, how money was laundered with Bitcoin
The business of “Superman29” went by the name of Herocoin, and was a bitcoin trading activity that was conducted until August 2019. He had set up both kiosks where to buy and sell bitcoin via ATMs, with transactions up to $25,000. But above all, he met his customers in person, and transferred bitcoin to them against payment in cash, with commissions of 25% of the price, a rate which, the Justice Department says, was well above the average market commission.
The 37-year-old was accused by the authorities of failing to conduct anti-money laundering procedures and in at least one case he knew that the money he transferred came from illegal activities on the dark web.
In addition, his ATMs allowed transactions of up to $25,000 but did not require users to comply with AML or KYC procedures. In fact, the transactions were anonymous.
According to the authorities, up to the time of the closure of operations, Herocoin had exchanged between $15 and $25 million worth of bitcoin, both in face-to-face exchanges and through ATMs.
Unfortunately for the founder, he conducted a bitcoin exchange with an undercover agent in August 2019, and this was probably his last transaction.
Kais Mohammad had even been approached by FinCEN to regulate 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 use his knowledge to create a robust compliance program, (Mohammad) avoided one altogether and profited by making his business an efficient, unchecked, and nearly anonymous conduit for money laundering and other crimes”.
This ruling confirms how the authorities are paying close attention to Bitcoin in particular because of the risks of money laundering from illegal activities. It also confirms that it is difficult to get away with it and that the penalties can also be very severe.