A man from Orange County, California, will spend the next two years behind bars after he was found guilty of operating an illegal BTC ATM service. The U.S. Department of Justice said the man had processed up to $25 million in BTC for his clients, some of it for criminals, which he was aware of.
Kais Mohammad was sentenced at the Central District of California by Judge Josephine Staton. This was after he pleaded guilty to the charges of money laundering, operating unlicensed money transmitting business and failing to maintain an effective anti-money laundering program in 2020, as CoinGeek reported. In addition to the sentence, he agreed to forfeit 17 BTC ATMs, 18.5 BTC, 222.5 Ether and $22,820 in cash.
As per the DoJ, Mohammad owned and operated a network of BTC ATMs from 2014 to 2019 through his company Herocoin. He would offer his clients BTC-to-cash exchange services, both in-person and through his ATMs. He reportedly charged up to 25% in commission which is way above the market average.
Mohammad advertised his business online under the screen name “Superman29”, claiming he could exchange up to $25,000 worth of BTC. Whenever he met his clients in person, he never inquired about the source of the funds. His clients could also access cash for BTC on his ATMs.
The DoJ claims that on a number of occasions, undercover agents posed as clients and reached out to Mohammad for his services. In one instance, the agent told Mohammad that the BTC was from a human trafficking and prostitution ring. Another agent brought him $16,000 worth of BTC which he claimed was from illegal dark web activity. Mohammad still exchanged the BTC despite knowing it was from illegal activities.
A former bank employee himself, Mohammad was well aware that he needed to register his business with FinCEN. In July 2018, FinCEN even contacted him and asked him to register his business and comply with all requirements for a money service business. And while he did register, he never implemented anti-money laundering programs.
In their sentencing memorandum, the prosecutors in charge of the case stated, “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.”
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