Bitcoin dealer faces up to 5 years in prison over operating unlicensed money transmitting business

Jacob Burrell Campos, a 21-year old Bitcoin dealer, is facing a prison term over operating an unlicensed money transmitting business. On Monday, October 29, 2018, he pled guilty in federal court to conducting an unlicensed money transmitting business, in connection with his sale of hundreds of thousands of dollars in Bitcoin to over 1,000 customers throughout the United States from January 2015 to April 2016.

Burrell admitted to operating a Bitcoin exchange without registering with the Financial Crimes Enforcement Network (FinCEN) of the US Department of Treasury, and without implementing the necessary anti-money laundering safeguards. Burrell advertised his business on Localbitcoins.com, and communicated with his customers through email and text messages, often using encrypted applications. He negotiated a commission of 5% above the prevailing exchange rate, and accepted cash in person, through nationwide ATMs, and through MoneyGram.

Burrell admitted that he had no anti-money laundering or “know your customer” program, and performed no due diligence on the source of his customers’ money.

Burrell admitted that, at first, he purchased his supply of Bitcoin through a U.S.-based, regulated exchange, but his account was soon closed because of the large number of suspicious transactions. He then resorted to a cryptocurrency exchange in Hong Kong, where he purchased a total of $3.29 million in Bitcoin, in hundreds of separate transactions, between March 2015 and April 2017.

Finally, Burrell admitted that he exchanged his US currency with Joseph Castillo, a San Diego-based precious metals dealer. Between late 2016 and early 2018, Burrell and others imported over $1 million in US currency on almost a daily basis. Castillo pled guilty to making a false statement on his federal tax returns, and is awaiting sentencing on December 13, 2018.

According to his plea agreement, Burrell agreed to forfeit to the United States a total of $823,357. He is set to be sentenced on February 11, 2019, and faces a maximum of five years’ imprisonment.

This marks yet another action by US authorities against cryptocurrency-related scams. In its latest enforcement report, the North American Securities Administrators Association (NASAA) underlined the increased focus on cryptocurrency fraud investigations. Over 200 active investigations of Initial Coin Offerings (ICOs) and cryptocurrency-related investment products are currently underway by regulators in the United States and Canada as part of “Operation Cryptosweep.” Since its launch in May, this campaign has led to 47 enforcement actions involving ICOs or cryptocurrency-related investment products. In the end of May, the number of such actions was 35.