Category Archives: bitcoin dealer

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Justice Department Says Bitcoin Dealer Blew Giant Hole Through Regulations

The U.S. Department of Justice has indicted Jacob Burrell Campos, a Mexican resident, for his Bitcoin dealing operation that spanned across international borders. The Assistant United States Attorney General says “Burrell’s activities ‘blew a giant hole’ through the legal framework of U.S. anti-money laundering laws by soliciting and introducing into the U.S. banking system close to $1 million in unregulated cash”. Campos is being held without bail. Due to his residency in multiple countries, disdain towards the United States, and large amounts of cash, he is considered a flight risk.

Bitcoin dealing used to be one of the most popular ways to purchase Bitcoin before the proliferation of Bitcoin ATMs and exchanges. Essentially, Bitcoin dealing is peer to peer trading, but some of the traders become big and start trading large amounts of Bitcoin, and assume the title of Bitcoin dealer. Due to the ease of access to Bitcoin ATMs and exchanges in the United States at this time, it is an unfortunate fact that anyone paying an extra premium of 10-20% and spending extra time to buy Bitcoins from a Bitcoin dealer is probably doing something illegal with the Bitcoins. The United States is aggressively cracking down on Bitcoin dealers, what was once an honorable position has become a crime.

Campos sent USD 1 million from Mexico into the United States to avoid reporting his earnings, which is what specifically got him busted. He transacted USD 3 million of Bitcoin over the course of thousands of transactions, USD 900,000 of which was sent to Bitfinex in Taiwan after his Coinbase account was closed. It is quite common for Bitcoin dealers to be banned from exchanges and platforms for sending and receiving money; ironically this leads to a Bitcoin dealing operation being even harder to trace and harder to stop.

Campos accepted cash for Bitcoins without asking any questions, which is a common and respectable way for Bitcoin dealers to operate. He says he only charged 5%, but this seems too low, Bitcoin dealers can easily charge up to 30% especially since most people using a Bitcoin dealer instead of a Bitcoin ATM are criminals.

The Department of Justice has hit Campos with 31 charges, including operating an illegal money transmitter business, not maintaining an anti-money laundering program, international money laundering, and conspiracy to structure monetary transactions, which means breaking up transactions to avoid reporting. Overall he will probably lose all the money he has and spend several years in prison. Campos is in a very bad position since he can’t bail out, which will make him desperate to cut a deal as fast as possible.

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Morpheus Titania Bitcoin Dealer Case Reveals Lengths of US Law Enforcement

Arizona Bitcoin dealer Thomas Mario Costanzo, who worked under the pseudonym Morpheus Titania, has been sentenced to 41 months in prison for five counts of money laundering, supposedly to facilitate drug trafficking. His case reveals how far police can go to take down a Bitcoin dealer.

Costanzo’s legal problems started in 2015 with a felony conviction for marijuana possession, a substance which is now legal in most of the United States. In April 2017, police raided his apartment, on suspicions that he was operating an unlicensed money transmitter business via selling Bitcoin. They found no incriminating evidence besides three boxes of bullets. Since he had a felony conviction for marijuana, he was arrested for the bullets, even though it was a personal amount that most other Americans are allowed to possess.

Evidence indicates that Costanzo was a cryptocurrency enthusiast, who had a good reputation as a Bitcoin dealer, and went as far as selling Bitcoin ATMs and Bitcoin mining rigs. When police raided his apartment, they found all of this but there was no evidence they could arrest him for.

Undercover police were said to approached Costanzo, telling him that they were drug traffickers and that they wanted Bitcoin. It is undisclosed just how far these conversations went but some view this move to be tantamount to entrapment.

Further, the police bought Bitcoin from Costanzo for two years before arresting him, indicating that the undercover agent probably developed a friendship with Costanzo.

An undercover agent organized a BTC 80 deal, worth USD 1 million or more depending on when the transaction occurred, and that’s when they arrested Costanzo. The court has ordered the Bitcoins be forfeited, calling it a forfeiture for illegal activity.

 

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Bitcoin Dealer Faces Prison for Over $6M in Unlicensed Transactions

Theresa Tetley of Los Angeles, who operated under the pseudonym Bitcoin Maven, making USD 300,000 a year from 2014 to 2017 by dealing Bitcoin on Localbitcoins.com, now faces up to 30 months in prison for operating an unregistered money transmitting business. In total, she transacted USD 6 to 9.5 million in Bitcoin on the popular peer-to-peer Bitcoin trading website.

Tetley has already pled guilty to federal charges and is hoping for a sentence of only one year’s imprisonment. Prosecutors say Bitcoin Maven fueled a black market financial system that existed outside of regulations. Indeed, Bitcoin dealers in the United States must obtain a money transmitter license, much like the license Western Union has. This requires Bitcoin dealers to keep thorough records of customer identities and transaction amounts, to pay taxes, and to keep large reserves of money in the bank so that customers don’t lose their money if a transaction goes bad.

Prosecutors were able to trace one of Bitcoin Maven’s deals, a BTC 80 (then worth USD 70,000) transaction, directly to drug money. This was enough evidence to label her entire operation as money laundering and to seize all of her money as proceeds of illegal activities. The court is trying to take ownership of BTC 40, 25 bars of gold, and USD 292,264 seized in March 2018 from her.

Many other Bitcoin dealers have met similar fates, such as Detroit Bitcoin dealer Sal Mansy who got a year in jail after selling USD 2.4 million  worth of Bitcoins, Localbitcoins trader Michael Lord who got nine years in prison and his father who got four years in prison, and Jason Klein who accidentally sold BTC 98 to undercover agents.

Most people who deal Bitcoins choose not to get a proper money transmitting license since collecting identity information scares customers away, and they don’t have enough money for the required reserve a money transmitter must keep. Essentially, US law requiring a money transmitter license has put individual Bitcoin dealers on the wrong side of the law and generally forced them out of business.

When it comes down to it, any active Bitcoin dealer who doesn’t follow regulations is likely to unknowingly launder money for illegal purposes. The main reason someone would use a Bitcoin dealer who charges a premium of 10-20% instead of an exchange or Bitcoin ATM that charges 5-10% is to remain anonymous or if they are unable to acquire a bank account legally.

 

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