A Californian man has pleaded guilty to three counts of federal charges in connection with operating an illegal digital currency money services business. Authorities said the business processed close to $25 million, with much of it being the proceeds of criminal activities.
Kais Mohammed was the founder and operator of Herocoin, an illegal digital currency business that operated from December 2014 to November 2019, investigators said. The 36-year-old allegedly helped his users to convert BTC to fiat, charging a 25% commission for his service.
Mohammed operated under the moniker ‘Superman29’ on online platforms where he advertised his services. Authorities said he claimed he could assist his clients buy and sell BTC throughout Southern California, in transactions of up to $25,000. He would meet his clients in public places and conduct the transactions, and never inquired about the source of funds or required client identification. In his guilty plea, Mohammed admitted that he was aware some of the money was proceeds of criminal activities.
As his business grew, he expanded into BTC ATMs, authorities said. He bought and installed the ATMs in malls and gas stations across California. He allegedly exchanged the BTC that the clients deposited and supplied the machines with cash.
The U.S. Department of Justice said Mohammed intentionally failed to register his business with the Financial Crimes Enforcement Network (FinCEN). He also chose not to develop an effective anti-money laundering program or file currency transaction reports for exchanges above $10,000, which Mohammed admitted he was aware he had to.
FinCEN later reached out to Mohammed regarding the obligation to register his company, which he did. However, he continued to fail to comply with the regulations set out by the watchdog.
The DoJ said that law enforcement agents conducted business with Mohammed in undercover capacity. These included a number of BTC purchases, each over $14,000. In a separate incident, an undercover officer claimed to be operating a sex trafficking business and needed to launder his proceeds, which Mohammed did.
The Orange County, California resident pleaded guilty to one count of operating an unlicensed money transmitting business, one count of failure to maintain an effective AML program and one count of money laundering. He is expected to have his hearing in the coming weeks. He faces a statutory maximum sentence of 30 years in prison.
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