Payza founders sentenced in $250M money laundering case

Getting your Trinity Audio player ready...

Two Canadian brothers will be serving prison sentences for running an unregistered money service business. Authorities said the two founded Payza, a payments processor that reportedly processed over $250 million in payments, some of it allegedly being for criminals.

Firhoz Patel and his brother Ferhan Patel will serve 36 and 18 months behind bars respectively, a federal judge in the District of Columbia has determined. Their company MH Pillars Inc., which was doing business as Payza.com, was sentenced to three years of corporate probation. The two must also forfeit $4.5 million that the Department of Justice had already seized. They also forfeited the two websites where they conducted their business—payza.com and alertpay.com.

The sentencing comes after the 46-year-old Firhoz and his 39-year-old sibling pleaded guilty to operating an unlicensed money transmitting business in July 2020. They also pleaded guilty to laundering money instruments.

U.S. Attorney Michael Sherwin, who announced the sentences, warned criminals against enabling fraud, stating that the U.S. is ready to “do everything within its power to take the profit out of crime and convict those who enable fraud.”

He added, “Operating an unlicensed money transmitting business that launders the transactions of other crimes and frauds is a serious criminal offense. Without the money laundering, the frauds run by Payza’s customers could not have been completed.”

The two brothers were the operators of Payza, a company that allegedly processed payments for known criminals, including drug traffickers and child porn ring operators. Moreover, they hadn’t registered their business. The two reportedly received cease and desist letters from several states in the U.S. but failed to shut their business down, authorities said.

Fully aware that some of their clients were criminals, they would withhold their names whenever they produced their client lists.

The DoJ said, “The defendants admitted to sanitizing Payza’s customers list by removing known illegal merchants, before producing that information to third parties requesting customer information… The defendants further admitted that Payza struggled to maintain its relationships with financial institutions, because Payza so frequently was found to have customers engaged in illegal activity.”

While the DoJ made no reference to Payza’s digital currency offering, the company has been allowing its clients to buy and sell digital currencies for years. It first made it possible to purchase BTC on its platform in 2014. Charlie Shrem was one of its consultants back then and touted the offering on Twitter.

Soft launched #Payza now selling Bitcoin. Buy #Bitcoin via bank transfer in 190+ countries. Try it http://t.co/5beL2yjMF3 cc @Payzaofficial

— Charlie Shrem (@CharlieShrem) August 8, 2014

In 2018, it partnered with BlockCypher to launch Dash support. It also supported XRP and Ether.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.