A man living in California was sentenced to federal prison for laundering up to $25 million through LocalBitcoins and a network of Bitcoin ATMs.
Kais Mohammad, 36, was sentenced to two years in federal prison. At a previous hearing, Mohammad pleaded guilty to one count of operating an unlicensed money transmitting business, one count of money laundering, and one count of failure to maintain an effective anti-money laundering program.
Mohammad allegedly committed the crimes through Herocoin, a network of bitcoin ATMs he operated from December 2014 to November 2019. Mohammad allowed users of the ATMs to exchange bitcoin for cash and charged commissions of up to 25%.
Mohammad also sold and bought bitcoin on LocalBitcoins using the “Superman29” username. He conducted transactions of up to $25,000 without asking where the funds originated.
Mohammad operated Herocoin without registering the company with the Financial Crimes Enforcement Network (FinCEN). He also allowed the users of his bitcoin ATMs to make exchanges anonymously as well as multiple consecutive transactions of up to $3,000 each without reporting suspicious activities.
Mohammad registered Herocoin in July 2018 after Fincen instructed him to do so. However, he failed to comply with anti-money laundering regulations. Mohammad continued to let exchanges worth over $10,000 go unreported. He also failed to report suspicious transactions that were worth more than $2,000.
From February 2019 to August 2019, Mohammad carried out multiple transactions with undercover agents who told him that they were engaged in illicit activities. Mohammad failed to file reports for the transactions. In one of the transactions that took place on August 28, 2019, Mohammad exchanged $16,000 in cash from an undercover agent for 1.58592 Bitcoin.
In pleading guilty, the defendant admitted that he knew some of the funds he exchanged were proceeds of crime. He even admitted that he knew a Herocoin user who engaged in illegal activities on the darkweb.
United States District Judge Josephine L. Staton sentenced Mohammad to two years in federal prison on May 28, 2021. Mohammad will also forfeit 17 Bitcoin ATMs, $22,820 in cash, 18.4 Bitcoin, and 222.5 Ethereum.