On April 8th 2019, Jacob Burrell Campos a U.S. citizen was found guilty of operating an illegal money transmitting business and was charged with 2 years in prison along with $823,357 in fines. Burrell was in police custody since August 2018 and pleaded guilty in October.
According to the statement released by the United States Department of Justice (DOJ) on their website, Jacob, a Mexico born US citizen was arrested on August 13, 2018, by the authorities on suspicion of operating a money laundering racket. However, on October 29, he pleaded guilty to the charges of operating an unlicensed Bitcoin exchange. The DOJ stated:
The federal government will continue to investigate and prosecute all white-collar criminals who refuse to comply with the anti-money laundering laws of the United States
In the United States to legally trade Bitcoin, traders are required to register with the U.S Department of Treasury’s Financial Crimes Enforcement Network (FinCEN). The FinCEN’s criterion requires trading company to be compliant with anti-money laundering and needs to implement safeguards against money laundering. Furthermore, cryptocurrency exchange must also register as a Money Services Business (MSB) in the United States, according to the Bank Secrecy Act, a law that prevents financial crimes and money laundering in the United States.
22 years old Burrell, admitted that he did no background checks, nor his company followed any of the anti-money laundering laws. He advertised his business on a website and communicated with his customers through text and emails. Burrell also stated that he took cash from his customers through bank transfers and MoneyGram and charged a commission of 5% on every transaction. In addition to that, Burrell also admitted that he used to buy Bitcoin through a registered US-based Bitcoin exchange but they closed his account in 2015 over his suspiciously large number of transactions. After which, he shifted to a Hong Kong-based exchange and between March 2015- April 2017, bought more than 3.2 million dollars worth of bitcoins.
The prosecutor, US Attorney Robert Brewster, in his closing remarks argued that the unlicensed money exchange companies are a grave threat to the US financial system. They are creating a hole for criminals and fraudsters in the regulatory system, who launder their cash without proper scrutiny, Robert Brewster also said:
Today’s sentencing of Burrell is a reminder to those illegal and unlicensed money transmitters that the laws and rules apply to cryptocurrency dealings just as they do to other types of financial transactions
US’s War on illegal use of Bitcoin
This is not the first time a Bitcoin trader has been jailed in the United States, just last year in August, an Arizona resident, Thomas Mario Costanzo was charged with five counts of money laundering. The DOJ has not been soft on the issue of crypto fraud, in 2015 before the Bitcoin boom. The department held a summit for traders, regulators and law enforcement to spark debate about the use of cryptocurrencies as an agent for money laundering and financial crime.
Bitcoin scams and illegal activities involving Bitcoin have become frequent in the United States. The United States is one of the freest countries in the world when it comes to the use of Bitcoin, but the recent surge in the Bitcoin-related crime rate has caused the US government to rethink its policies. In December 2018 two United States congressmen proposed a bill to exclude cryptocurrencies like Bitcoin from the security laws so that Bitcoins can be considered as a taxable asset rather than securities. The law was aimed to reduce tax evasion through the use of Bitcoin and other cryptocurrencies.