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California Man Laundered up to $25m Through Bitcoin ATMs

An Orange County man admitted laundering up to $25 million through a network of unlicensed Bitcoin ATMs and in-person exchanges. The defendant, Kais Mohammad, knew many of his customers laundered the proceeds of crime through his Bitcoin exchange network.

Kais Mohammad, 36, of Orange County, California, pleaded guilty on July 22 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.

A picture of HeroCoin ATMs

HeroCoin ATMs

According to information revealed in court, Mohammad operated Herocoin, a Bitcoin ATM network, between December 2014 and November 2019. United States prosecutors described Herocoin as an “illegal virtual-currency money services business.” He also exchanged a significant amount of Bitcoin for cash through LocalBitcoins under the username “Superman29.” Mohammad exchanged Bitcoin for cash at a much higher rate than the industry standard, according to prosecutors. He advertised a 25% rate for transactions up to $25,000.

A picture of The HeroCoin logo displayed on the comapny's ATMs and social media profiles

The HeroCoin logo displayed on the comapny's ATMs and social media profiles

On Twitter, the Herocoin account confirmed a 20% rate plus a $5 fee per transaction in response to an outraged user.

@EsmeGregson:

PEOPLE NEED TO KNOW THAT HEROCOIN charges 20% plus 5 dollar “fee” per transaction. For example: $155 deposited into a HeroCoin ATM will get $120 worth of coins in your wallet. IMO charging 25% to convert CASH into digital currency is OFFENSIVE.

@HeroCoinBTC in response to @EsmeGregson:

Hello, yes, that is our current rate which is displayed in the total price of BTC on the machine before purchase as well as the $5 transaction fee. We have deleted our tweet from over a year ago of our prior rates to avoid any confusion.

Mohammad failed to register Herocoin with the Financial Crimes Enforcement Network (FinCEN) as required by law. Mohammad registered the company in 2018 after FinCEN had contacted him about the status of his company. Even after being contacted by FinCEN, Mohammad failed to comply with their regulations, including Anti-Money Laundering (AML) measures and Know Your Customer (KYC). He similarly failed to report transactions above a certain dollar amount as required by law.

A picture of A functioning HeroCoin ATM

A functioning HeroCoin ATM

On September 12, 2018, federal investigators in an undercover capacity purchased $14,000 in Bitcoin from one of the defendant’s ATMs. Mohammad never reported the transaction. Between February and August 2019, Mohammad regularly exchanged Bitcoin for cash with undercover agents who claimed they had an illegal source of income. The agents told Mohammad they worked for a bar that employed women to provide sexual favors to patrons. On August 28, 2019, Mohammad exchanged $16,000 in Bitcoin for one of the undercover agents. He did not report any of the transactions with the agents.

Mohammad admitted exchanging between $15 million and $25 million during the operation of the Herocoin ATMs and the “Superman29” LocalBitcoins account. He admitted he failed to ask his customers about the source of their funds. He also admitted to knowing that at least one of his clients conducted illegal activity on the darkweb.

He agreed to forfeit the Bitcoin ATMs, an undisclosed amount of cash, and an undisclosed amount of cryptocurrency. He faces a maximum sentence of 30 years in prison.

14 Comments
wth
2912c810 Thu, Jul 23, 2020

should have paid his dues. smh could have gone long term with this.

CoinPOS
e8dcc910 Fri, Jul 24, 2020

And with this everyone should know why Coon Base isn’t safe. It’s hard to understand why the government let this story out written the way it is. LBC, CoinBase, any of these type of services have now proven their hands are tied to the US government. BitCoin has never ever been “anonymous”.

LoyalLlama
0e4603a0 Fri, Jul 24, 2020

Dam! I used to trade with that guy on a weekly. Always under $10k. He accepted any crypto, specially XMR. Which is why i used to dump anywhere around $3-$5k on the guy for cash money. Just saying. Always use an Uber/Lyft. Always meet in a public place. Always take the scenic route home. Hodl.

huh
1a1c5bb0 Fri, Jul 24, 2020

@LoyalLlama and the 25% fee were worth it?

polason
5cbfb9f0 Fri, Jul 24, 2020

He was in the wrong club. Clinton Foundation=0 charge Hunter Biden and daddy,1.5bil=no problems.

john
5b25a540 Sat, Jul 25, 2020

ANY BITCOIN EXCHANGE WORKING WITH FINCEN SHOULD BE BOYYCOTTED PERIOD. THEY WANNA BE SNITCHES OK COOL. LETS PLAY BOYCOTT THEM AND HIT THEM WHERE IT HURTS THE MOST THERE POCKETS.

john
3e05e7a0 Mon, Jul 27, 2020

THEY WANNA GIVE THE GUY 30 YEARS FOR EXCHANGING COIN THATS INSANE. WHOLE SYSTEM IS CORRUPT. GIVE HIM A BIG FINE AND LET HIM GO. FREAKING JOKE. FINCEN FU AND HAVE A GOOD DAY

WTFFFFFFFFFFFFFFFF
1e39d1d0 Mon, Jul 27, 2020

`fent dealers get less than 30 years SMFH.

dannyboy
b53e8a70 Mon, Jul 27, 2020

Sounds like he would have been ok, if he didn’t sale to people stating this was for illegal activity, and if he would have registered as a money transmitter and at the least, loosely comply.. he would be still be doing things.

the article is damn near saying.. give us our tax money.. if he did this shit all semi above board; he would be in a lot better position

Dannyboysright
a1a2ee20 Thu, Jul 30, 2020

^^this is correct. It honestly amazes me that he was able to operate so long with actual BTC atms without following basic laws... And yeah as far as selling p2p- although technically illegal they only make a deal about it if you keep selling after the cop admits he's a criminal. What fucking dipshit would tell the exchanger that he acquired his coin through illegal means? And when someone says this to you, as a seller, DO NOT SELL THEM CRYPTO. They're either a cop or a dumb fuck and either way it's not worth it

John...
13306110 Thu, Jul 30, 2020

John, are you again bitcoin for any other purpose than illegal activity?... Bitcoin is a far superior than debt notes and good for much much much more than you getting your drugs

John...
4a4c8b50 Thu, Jul 30, 2020

Against* not again. Typo

TT
532fe5e0 Mon, Aug 3, 2020

A hero for sure

vel
f0bc9850 Thu, Aug 6, 2020

Assuming he was dealing with some people doing some pretty nasty things, but 30 years for moving around money like they do every day? Some grade A bull shit

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