A man identified as Jacob Burrell Campos has pleaded guilty, before a federal court in San Diego, to operating an unlicensed money transmitting enterprise which involved the sale of hundreds of thousands of dollars in Bitcoin to over 1000 customers throughout the United States for 16 months.
Burrell, a native of Rosarito, Baja, contravened the provisions of the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury while failing to register his Bitcoin Exchange and implementing the anti-money laundering measures, according to a Department of Justice (DoJ) press release.
Transactions on LocalBitcoins.com
Burrell kept correspondence with his customers through encrypted emails and text messages and allegedly negotiated a commission of 5% above the prevailing exchange rate and obtained cash directly from unsuspecting customers.
Some payments were made to him through nationwide ATMs and through MoneyGram. Burrell admitted that he failed to implement any anti-money laundering or “know your customer” program. He also failed to perform due diligence on his customers’ source of funds.
Initially, Burrell kept his business afloat through procurement of Bitcoin from a U.S.-based, regulated exchange. Things, however, went awry after his account was shut down due to suspicious transactions being carried out. Afterward, he resorted to a Hong-Kong-based cryptocurrency exchange and purchased $3.29 million in Bitcoin, split into hundreds of separate transactions between March 2015 and April 2017.
Importing Millions into the U.S.
In connivance with a San Diego based metals dealer whom Burrell identified as Joseph Castillo, the suspect exchanged his U.S currency, all stashed in Mexico. Between late 2016 and early 2018, Burrell connived with other perpetrators to import millions of U.S. dollars into the country. The importation was carried out in amounts just a tad below the $10,000 reporting requirement.
Castillo who is also one of the suspects pled guilty to tendering false statement on his federal tax returns and will be convicted on December 13, 2018, while Burrell could be slammed with five years imprisonment when he will be sentenced on February 11, 2019.
In the court filing entered against Burrell on August 8, prosecutors alleged that he sold about $750,000 worth of bitcoins to 900 individuals in the U.S. via his exchange service. He was also charged on a 28 count of international money laundering. In the plea bargain, Burrell agreed to forfeit a sum of $823,357.00 to the United States.
U.S. Attorney Adam Braverman condemned the illicit transfer of money across national borders, describing it as a threat to the integrity of the nation’s banking system.
“Unlicensed money transmitting businesses, especially those operating at or near the border, pose a serious threat to the integrity of the U.S. banking system and provide an ‘open door’ for criminals to utilize such businesses to launder the proceeds of their illicit activities,” he noted.
This is not the first time the DoJ has shut down unregistered bitcoin money transmitting businesses.
In June 2018, two suspects who were allegedly involved in the manufacturing and distribution of drugs in exchange for bitcoin, were indicted by the Department of Justice for the district of Maryland. The government sought the forfeiture of $5,665,000 in addition to the worth of 4,000 bitcoins believed to have been the proceeds of the illegal enterprise.
A Bitcoin trader in California was also indicted for running an unregistered Bitcoin-fiat business. Under her pseudonym ‘Bitcoin Maven’, Theresa Tetley ran a black market business via listings on popular peer to peer marketplace Localbitcoins between 2014 and 2017, where she reportedly earned above $300,000 yearly.