- The founder of bitcoin transaction service Herocoin has been jailed for two years
- Kais Mohammad exchanged up to $25 million in crypto without registering the company
- Some of the transactions were proceeds from criminal acts
The founder of money transmitting service Herocoin, which facilitated private bitcoin transactions for almost five years, has been handed a two-year jail sentence. Kais Mohammad, who established Herocoin in 2014 and advertised his services under the moniker ‘Superman29’, pleaded guilty to three charges relating to his operation and was yesterday sentenced to 24 months as a result. Mohammad used a network of his own Bitcoin ATMs to facilitate bitcoin for cash transactions, some of which came from criminal enterprises, charging a hefty 25% commission.
Bitcoin ATM Network Used to Facilitate Transactions
Herocoin was founded in December 2014 at a time when in-person bitcoin transactions were very common. Mohammad would meet clients in person and take them to one of his network of Bitcoin ATMs where the transaction would take place. Mohammad’s ownership of the ATMs ensured he could process cryptocurrency deposited into the machines and supply the cash used in them, seemingly believing that this closed loop system would be impregnable.
However, FinCen contacted Mohammad about the Bitcoin ATMs in July 2018, telling him he needed to register Herocoin as a money transmitter. Mohammad did so, but continued to skirt FinCen laws all the same. FinCen grew suspicious and worked with other law enforcement agencies to carry out a sting operation, resulting in Mohammad laundering cash from undercover agents who told him it came from illegal means. Mohammad was arrested and Herocoin was swiftly shut down.
Herocoin Laundered Up to $25 Million
In total, FinCen discovered that Mohammad exchanged between $15 million and $25 million through Herocoin. In September 2020 he pleaded guilty to operating an unlicensed money transmitting business, money laundering, and failing to maintain an effective anti-money laundering program through Herocoin.
Mohammad agreed to forfeit to the government 17 Bitcoin ATMs and $22,820 in cash, ₿18.4 and 222.5 ETH, together worth over $1.2 million.