An Orange County man has confessed up to $25 million in fraud through a network of unlicensed Bitcoin ATMs and personal exchanges. The defendant, Kais Mohammad, knew many of his clients were using his Bitcoin exchange network to launder the proceeds of the crime.
Kais Mohammad, 36, a.k.a. "Superman29," was charged at the United States District Court in a tri-count criminal information filed today. Mohammad agreed to plead guilty to one count of running an unlicensed money transmission service, one count of money laundering and one count of failure to implement an effective anti-money laundering policy in a plea agreement also filed today.
Mohammad ran Herocoin, a Bitcoin ATM network, between December 2014 and November 2019, according to court-revealed records. US prosecutors described Herocoin as a "illegal virtual-currency money services enterprise." He also exchanged a large amount of Bitcoin for cash through LocalBitcoins under the username "Superman29." According to prosecutors, Mohammad exchanged Bitcoin for cash at a much higher rate than industry norm. He has promoted a transaction rate of 25 percent up to $25,000.
Mohammad had failed to report Herocoin as required by law with the Financial Crimes Enforcement Network (FinCEN). Mohammad registered the firm in 2018 after FinCEN had contacted him about his company's status. Also after contacting FinCEN, Mohammad refused to comply with its legislation, including Anti-Money Laundering (AML) and Know Your Customer (KYC) initiatives. He also failed to disclose transactions in excess of a certain amount of the dollar as allowed by law.
On September 12, 2018, federal agents purchased $14,000 in Bitcoin from one of the defendant's ATMs in an undercover capacity. Mohammad never announced the contract. Between February and August 2019, Mohammad traded Bitcoin regularly for cash with undercover agents who believed that they had an illicit source of revenue. The agents told Mohammad that they had been working for a bar that hired women to give patrons sexual favors. Mohammad traded $16,000 at Bitcoin for one of the undercover agents on August 28 , 2019. He had not mentioned any of the contacts with the police.
In total, Mohammad admitted that he traded between $15 million and $25 million from the trades and transactions taking place at his Bitcoin kiosks in-person.
During a hearing in the coming weeks Mohammad is expected to plead guilty to the charges. Mohammad will face up to a statutory maximum term of 30 years in federal prison after pleading guilty. Mohammad has agreed as part of the plea deal to forfeit cash, cryptocurrencies, and 17 Bitcoin ATMs that he ran as part of his company.