The long hands of the law have caught a U.S. citizen after he pleads guilty in a U.S. Federal court to operate an unregistered Bitcoin exchange via LocalBitcoins.com. This is according to the Department of Justice press release published on the 29th of this month.
It was reported that Burrell, as he’s being called, admitted to the crime of selling hundreds of thousands of dollars in Bitcoin to over 1,000 customers in the U.S. from January 2015 to April 2016.
After Burrell took advantage of the popular peer-to-peer platform LocalBitcoins.com, he refused to register his business activities with the U.S. Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury and also apply due diligence such as the anti-money laundering measures on the sources of his client’s funds.
To lure his unsuspecting customers, he negotiated his Bitcoin sales at a commission of 5 percent above the prevailing rate and accepted payments cash in hand, through ATMs or MoneyGram while communicating with them through encrypted emails or SMS apps.
Though at first, he started by purchasing his supply of Bitcoin through a U.S. based regulated exchange but his account was shut down later because of the huge sums of suspicious transactions on it.
Later he moved on to a crypto exchange based in Hong Kong, where he bought a total of $3.29 million value of Bitcoin cryptocurrencies, in hundreds of separate transactions, between March 2015 to April 2017. He even admitted that he had exchanged his U.S. currency with his San Diego-based precious metals dealer, Joseph Castillo.
In the same period between late 2016 and early 2018, Burrell and some unnamed individuals imported over 1 million dollars on almost a daily basis
Castillo is set to be sentenced on February 11, 2019, after he pleaded guilty and agreed to forfeit a total of $823,357 to the United States. He faces a maximum sentence of five years imprisonment.
Adam Braverman, U.S. attorney, was cited in an announcement on this, saying that;
“Unlicensed money transmitting businesses, especially those operating at or near the border, pose a serious threat to the integrity of the US banking system, and provide an ‘open door’ for criminals to utilize such businesses to launder the proceeds of their illicit activities.”
This is another action U.S authorities have taken against cryptocurrency related scams. In June, an L.A. based trader who used the pseudonym “Bitcoin Maven” was prosecuted for running an unregistered multi-million dollars Bitcoin-fiat money transmitting business, also via LocalBitcoins.com listing.