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The U.S. government has taken down a $25 million bitcoin ATM operation and seized 17 machines along with some cryptocurrencies. The Department of Justice says the man behind this unlicensed bitcoin ATM operation has agreed to plead guilty and is facing up to 30 years in prison.
The U.S. Department of Justice (DOJ) announced Wednesday that a California man, Kais Mohammad, has 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 served 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.
Mohammad later purchased and advertised a network of two-way Bitcoin ATM kiosks located in malls, gas stations, and convenience stores in Los Angeles, Orange, Riverside and San Bernardino counties. The DOJ described: “Mohammad processed cryptocurrency deposited into the machines, supplied the 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 he continued to fail to comply fully with federal law concerning money laundering, conducting due diligence and reporting suspicious customers,” the Justice Department noted.
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-type kiosks.” 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.
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