Coin.mx executives arrested and charged with operating as unlicensed money transmitters and money laundering. (See Press Release here)
Coin.mx is or at this point was an American bitcoin exchange.
In one of my previous articles, I speculated that one of the reasons FinCEN chose to view operators of virtual currency businesses as money transmitters was because according to federal law, operating as a money transmitter without a license carried criminal penalties
(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both. 18 U.S.C. 1960
According to the unsealed complaint today, that is not the main reason federal government took interest in Coin.mx. Obviously, at this stage, the government’s complaints against two men, Anthony Murgio and Yuri Lebedev is nothing but allegations. (Murgio Complaint; Lebedev Complaint)
But if the government’s allegations will prove true, Coin.mx not only knew that the company was engaged in money laundering, but they actively sought it as a way to expand the business. For example
“in a series of chats LEBEDEV proposed that Coin.mx begin offering exchange services through Russia-based payment processors because ‘then a lot of [R]ussians can buy ! . . . and wash money as well.”
For all I know the quote was taken out of context and placed into the complaint to bolster the government’s chances of getting an arrest warrant. But another allegation, if proven true, would make me think that if coin.mx may not have been complicit in the alleged money laundering activities at least they looked the other way when something really suspicious was happening.
By way of another example, the complaint describes a scenario where a company has been a victim of cryptowall ransomware — a scenario where a program rendered the victim’s computer unusable by encrypting the files and then decrypts them after a ransom has been paid. The victim described the situation to a coin.mx employee, but coin.mx employee has not only failed to file a suspicious activity report, but pretty much took the “don’t ask, don’t tell approach to the whole thing.”
Then there is an allegation is that Coin.mx, for all intents and purposes, took over a small credit union for the sole purpose of avoiding raising federal regulator’s eyebrows regarding ACH transactions going through the credit union.
Once again, at this point all these allegations are merely that –allegations. Time will tell whether there is actually any substance to them. But as of now, Mr. Lebedev and Mr. Murgio are looking at jail time.