A California court sentenced the owner of a Bitcoin-ATM network, Kais Muhammad, to two years in prison for operating an unlicensed business in the virtual-currency sector and laundering up to $25 million.
According to prosecutors, from December 2014 to November 2019 Muhammad owned the company Herocoin. In person, he exchanged bitcoin for fiat with customers, charging a 25% fee.
Prosecutors say the convicted man knew that part of the user funds originated from illicit activity. At least one company client engaged in wrongdoing on the dark web.
Muhammad also purchased several Bitcoin ATMs, placing them in shopping malls, stores and gas stations. He topped up the terminals with cash himself.
Users could conduct transactions without identity verification. They could perform multiple consecutive transactions up to $3,000 each.
A spokesman for the U.S. Attorney’s Office for the Central District of California, Kieran McEvoy, noted that Muhammad had previously worked in the banking sector, and thus knew about the need to register his business with the U.S. Financial Crimes Enforcement Network (FinCEN).
“Rather than using his knowledge to build a robust compliance program, Muhammad ignored it, turning the business into an efficient, unchecked and almost anonymous conduit for money laundering and other crimes,” prosecutors said.
According to McEvoy, the convicted man understood that his activities fell under the regulatory regimes of KYC and AML, including reporting currency transactions and suspicious transactions over $2,000.
In 2018, FinCEN ordered Muhammad to register the business. He complied with the directive, but continued to ignore broader regulatory requirements.
In 2020, the man pleaded guilty to three counts. He faced up to 30 years in prison.
Muhammad agreed to surrender 17 Bitcoin ATMs, $22,820 in fiat currency, 18.4 BTC and 222.5 ETH.
As reported in the first quarter of 2021, the number of crypto ATMs worldwide rose by 21.8%. New terminals are installed at a rate of more than 36 units per day, and the majority of them are located in the United States.