Federal government sends man with pen to launder up to $ 25 million through Bitcoin ATMs and Herocoin cryptocurrency
A southern California man was sentenced to two years in federal prison for illegally operating Bitcoin ATMs and kiosks where customers could buy the crypto with cash or sell it for cash. Kais Mohammad, 37, was sentenced in the United States District Court in Santa Ana.
Mohammad ran an unlicensed virtual currency business and laundered up to $ 25 million in Bitcoin and cash for five years through Herocoin, a cryptocurrency token that runs on the Ethereum platform and contains a smart contract allowing decentralized peer-to-peer online betting.
Mohammad has owned and operated Herocoin for five years and has offered Bitcoin ATM cash exchange services, said Ciaran McEvoy, spokesperson for the U.S. Attorney’s Office. It charged commissions of up to 25%, well above the market rate, the Orange County Register reported.
The company operated a network of Bitcoin ATM kiosks at malls, gas stations, and convenience stores in Southern California, where customers could buy Bitcoin for cash or sell Bitcoin in exchange for cash distributed through machines.
A former bank employee, Mohammad knew he had to register his company with FinCEN – the US Treasury Department’s financial crime crackdown network. He knew he had to maintain an effective anti-money laundering program and report various virtual currency exchanges, but he did not. He also knew that some of his clients’ funds came from illegal activity, McEvoy said.
Mohammad eventually registered the company but failed to do due diligence and report suspicious customers.
Undercover agents posed as employees of a karaoke bar that employed women from Korea and gave Mohammad $ 16,000 in cash in exchange for Bitcoin, even after agents said the funds came from ‘illegal activities, McEvoy said.
Every cryptocurrency transaction is recorded on an immutable blockchain, and cybercriminals leave a trail when they cash digital currency for cash, the Financial Times reported. Forensics firms are using technology that analyzes blockchain transactions to help U.S. intelligence agencies paint a picture of the intertwined crypto-criminal ecosystem.
Crypto-forensic firms that help law enforcement track criminal groups by analyzing currency flows include New York’s Chainalysis, which raised $ 100 million to over $ 2 billion earlier this year, London-based Elliptic, which counts Wells Fargo as an investor, and the US government. -backed CipherTrace.
In 2020, around $ 5 billion in funds representing less than 1% of all crypto flows were received by illicit entities, and those illicit entities sent $ 5 billion to other entities, according to Chainalysis, a reported the Financial Times.
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Stricter rules and regulatory concerns have prompted some cybercriminals to use unlicensed exchanges, which typically don’t require any KYC information. Many operate outside of extradition treaties.
The largest illegal transactions are facilitated by over-the-counter brokers, with certain transactions being set up for this sole purpose. There are over 11,600 crypto ATMs around the world with little to no regulation through which small transactions go, as well as online gambling sites that accept crypto.
Forensics firms determine which crypto wallets belong to which criminal groups. Their research shows that hackers rent their ransomware to affiliate networks while taking a share of the proceeds. The DarkSide hacker gang shut down the colonial pipeline earlier this month, according to Chainalysis.
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