Bitcoin trader sentenced for operating an unlicensed money transmission business

A Canadian man has been sentenced to 20 days in prison and more than $1 million in forfeitures for operating an unlicensed cryptocurrency business

What has happened?

A Canadian man has been sentenced to prison and more than $1 million in forfeitures for operating an unlicensed cryptocurrency business.

What does this mean?

The US District Court of Seattle has sentenced Louis Ong, from British Columbia, to 20 days of incarceration and more than in $1 million in forfeitures for operating an unlicensed money transmission business.

In a press release, the US Attorney's Office of the Western District of Washington stated that, in December 2016, federal agents responded to an ad Ong, 37, had placed about buying and selling bitcoin.

Later on, Ong travelled to the Seattle area to exchange cash for bitcoin.

The agents, who were posing as drug traffickers, told Ong on several occasions that the funds they were exchanging came from drug trafficking, but Ong repeatedly told them that he did not want to know the source of the money, so that he had "plausible deniability".

The undercover agents then told Ong that he needed to register as a money transmitter with FinCEN, a US Treasury bureau tasked with safeguarding the financial system from illicit use and money laundering.

Ong duly registered, but "made little effort" to comply with regulations about reporting suspicious transactions.

Ong was arrested in July 2017 in the middle of his sixth financial transaction with undercover agents.

According to the relase, after each of the exchanges for bitcoin, the agents used licensed cryptocurrency exchanges to return the government funds to cash.

As part of his plea agreement, Ong is forfeiting cash and bitcoin now valued at more than $1 million.

“This is one of a series of cases where federal agents and prosecutors have gone after individual actors – not just companies – engaging in virtual currency exchange, which is a form of money transmission under FinCEN regulations and guidance,” said Hogan Lovells partner Gregory Lisa, who formerly led FinCEN’s Office of Compliance and Enforcement.

“The clear takeaways are these: first, if you do so, you may become a financial institution, whether you’re incorporated or not; second, you can’t turn a ‘blind eye' towards illegal activity, and hope that this will keep you out of trouble; and third, if you participate in cryptocurrency exchange, count on the fact that there’s a growing presence of regulators, examiners, and law enforcement agents policing this space.”

“The dark web is not a free pass for crime and mayhem.. As this defendant knew full well, the laws and rules apply to crypto currency dealings just as they do to other types of financial transactions," said US Attorney Annette L. Hayes.

Next steps

If you want to take advantage of blockchain's huge potential and disruptive impact, while avoiding falling foul of ever-developing regulatory and legal requirements, visit our Hogan Lovells Engage Blockchain Toolkit.

Gregory Lisa
Washington D.C.
Languages English
Topics Blockchain
Countries United States


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