SANTA ANA, California – Orange County man was sentenced today to 24 months in federal prison for operating an illegal virtual currency money service business that traded up to $ 25 million – some for criminals – through in-person transactions and a network of Bitcoin-type kiosk ATMs.
Kais Mohammad, alias “Superman29”, 37, of Yorba Linda, was sentenced by US District Judge Josephine L. Staton.
Mohammad pleaded guilty in September 2020 to three counts of operating an unlicensed money-laundering business, money laundering and failing to have an effective anti-money laundering program in place. silver. Mohammad agreed to cede 17 Bitcoin ATMs, $ 22,820 in cash, 18.4 Bitcoin, and 222.5 Ethereum cryptocurrency to the government.
From December 2014 to November 2019, Mohammad owned and operated Herocoin, an illegal virtual currency money services business. As part of his business, Mohammad offered Bitcoin-cash exchange services, charging commissions of up to 25% – well above the going market rate.
Using the nickname “Superman29,” Mohammad advertised his online business to buy and sell Bitcoin in transactions up to $ 25,000. In a typical transaction, he met clients in a public place in Southern California and exchanged currency for them. Mohammad generally did not inquire about the source of client funds and on some occasions knew that the funds were the product of criminal activity. Mohammad knew that at least one Herocoin client was engaged in illegal dark web activity.
Mohammad processed the cryptocurrency deposited in the machines, provided the machines with money for customers to withdraw, and maintained the server software that ran the machines. Mohammad was able to monitor the transactions on the machines and identify every transaction that occurred on them.
During the time of Operation Herocoin, Mohammad, a former bank employee who trained others on compliance issues, intentionally failed to register his company with the Financial Crimes Enforcement Network (FinCEN) of the US Department of Treasure. Mohammad knew he had to – but chose not to – develop and maintain an effective anti-money laundering program, file currency transaction reports for currency exchanges over $ 10,000, demonstrate due diligence on clients and file suspicious activity reports for transactions over $ 2,000 involving clients whom he knew, or had reason to suspect, to be involved in criminal activity.
As for his Bitcoin ATM network, Mohammad’s machines have allowed customers to complete financial transactions without requiring any identification and have allowed customers to complete multiple consecutive transactions of up to $ 3,000 each without ever reporting a transaction. suspicious activity to regulators or law enforcement.
After FinCEN contacted Mohammad in July 2018 regarding his need to register his business, Mohammad did so, but continued to fail to fully comply with federal law regarding money laundering, conduct due diligence and the reporting of suspicious customers.
“Rather than using his knowledge to create a strong compliance program, (Mohammad) avoided one altogether and took advantage of it by making his company an efficient, uncontrolled and almost anonymous channel for money laundering and other crimes, ”the prosecutors wrote in their sentencing memorandum.
From February 2019 to August 2019, Mohammad also made several face-to-face transactions with undercover officers who depicted they worked at a “karaoke bar” that employed Korean women who entertained the men in various ways, including indulging in to sexual activities. On August 28, 2019, Mohammad met an undercover law enforcement agent and exchanged $ 16,000 in cash, which the agent represented was the proceeds of illegal activity, for 1.58592 Bitcoin. Mohammad never filed a foreign exchange transaction report or suspicious activity report for these transactions.
In total, Mohammad traded between $ 15 and $ 25 million in in-person exchanges and transactions made at his Bitcoin kiosks.
The IRS criminal investigation, Homeland Security Investigations, and the Los Angeles County Sheriff’s Department investigated this case. This investigation was conducted with the support of the Organized Crime Drug Enforcement Task Force (OCDETF).
US Deputy Prosecutor Ian V. Yanniello of the International Narcotics, Money Laundering and Racketeering Section continued the case.