O.C. man to plead guilty to laundering millions in cash and Bitcoin
A Yorba Linda man is expected to plead guilty to operating an unlicensed virtual-currency business that authorities allege laundered millions in bitcoin and cash for criminals, the U.S. Attorney’s Office announced Wednesday.
Kais Mohammad, 36, has agreed to admit to operating an unlicensed money transmitting business, money laundering and failure to maintain an effective anti-money laundering program, according to a plea agreement filed in federal court.
Mohammad, through his company Herocoin, offered to exchange Bitcoin, a virtual currency, for cash or vice versa in exchange for a commission.
The company also operated a network of “Bitcoin ATM-type kiosks” in malls, gas stations and convenience stories throughout Orange, Los Angeles, Riverside and San Bernardino counties. Those kiosks allowed customers to either buy Bitcoin with cash, or sell Bitcoin in exchange for cash that would be dispensed onsite.
Prosecutor’s allege that Mohammad knew at least some of his clients’ funds came from illicit activity, and say he charged commission rates that were “significantly above” the market rate.
As part of his plea deal, Mohammad – who used the online moniker “superman29” – admitted to exchanging more than $15 million through the company.
As a former banker, prosecutors say, Mohammad was aware of, but ignored, reporting requirements for virtual currency exchanges. Regulations required Mohammad to report exchanges of currency above $10,000 or any transactions above $2,000 for customers he had reason to believe were involved in criminal activity, according to the U.S. Attorney’s Office.
During their investigation, law enforcement officials carried out several transactions with Mohammad, according to court records.
One undercover agent purchased $14,500 worth of Bitcoin during three successive transactions at a kiosk in Lakewood.
Mohammad also met in person with undercover agents who “represented they worked at a ‘karaoke bar’ that employed women from Korea who entertained men in various ways, including engaging in sexual activity,” according to the U.S. Attorney’s Office. He agreed to accept $16,000 in cash from one of those agents in exchange for Bitcoin, prosecutor’s said.
Mohammad did not file the needed currency transaction reports, or a suspicious activity report, in connection to the exchanges involving the undercover agents, prosecutors allege.
As part of his plea agreement, Mohammad has agreed to forfeit 17 kiosks, as well as an unspecified amount of cash and cryptocurrency. A date for his change of plea hearing has not yet been scheduled.