CALIFORNIA — Kais Mohammad, 36, of Yorba Linda has agreed to plead guilty to operating an illegal virtual-currency money services business that exchanged up to $25 million. The plea agreement was filed on Wednesday, July 22.
Mohammad, using the moniker “Superman29,” ran an illegal virtual-currency money services business named “Herocoin.” Mohammad offered “Bitcoin-cash” exchange services through in-person transactions and a network of Bitcoin ATM-type kiosks, the U.S. Attorney’s Office said on July 22.
He operated the illegal business from December 2014 to November 2019, according to his plea agreement.
Mohammad advertised his business online to buy and sell Bitcoin throughout Southern California, in transactions up to $25,000. He would charge commissions of up to 25 percent, which according to the U.S. Attorney’s Office, is “significantly above the prevailing market rate.”
The exchanges were typically made at a public location, where Mohammad would meet his clients and exchange currency for them. Mohammad knew the funds were the proceeds of criminal activity on many transactions, even though he did not inquire his clients as to the source of the money.
Using the “Superman29” moniker, he advertised his business online to buy and sell Bitcoin throughout Southern California.
Mohammad purchased a network of Bitcoin ATM-type kiosks at malls, gas stations, and convenience stores in Los Angeles, Orange, Riverside and San Bernardino counties. He operated and monitored transactions on the machines and identified each transaction that occurred on them.
Mohammad formally registered his company in July 2018 after being contacted by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
Mohammad failed to maintain an effective anti-money laundering program, requiring compliance with federal law concerning money laundering, conducting due diligence and reporting suspicious customers.
Undercover agents met with Mohammad multiple times from February 2019 to August 2019 and conducted illegal transactions with him. He “never filed a currency transaction report or suspicious activity report for these transactions.”
Mohammad is expected to plead guilty to one count of operating an unlicensed money transmitting business, one count of money laundering, and one count of failure to maintain an effective anti-money laundering program.
IRS Criminal Investigation, Homeland Security Investigations, and the Los Angeles County Sheriff’s Department conducted the investigation with the assistance of the Organized Crime Drug Enforcement Task Force (OCDETF).
Mohammad admitted that he exchanged between $15 million and $25 million from in-person exchanges and transactions occurring at his Bitcoin kiosks, the plea agreement says.