A Los Angeles man has pleaded guilty to charges in relation to his running of an unlicensed cryptocurrency exchange business as part of a plea deal.
Kunal Kalra, 25, who went by the online names of “coinman” and “shecklemayne,” is said to have operated an exchange business that offered bitcoin for U.S. dollars and vice versa between May 2015 and October 2017.
In that business, which was primarily run through LocalBitcoin but also a company called Paxful, Kalra offered exchanges of cash for bitcoins to criminals, including those who sold narcotics on the darknet, a part of the internet reachable only through special software.
In additional, Kalra also operated a bitcoin ATM that did not require users to provide their identities or install security cameras to identify customers as is required under the law. The U.S. Department of Justice said Friday that the case is likely the first federal criminal case against an unlicensed money-remitting business that used a bitcoin kiosk.
Karla’s ultimate downfall came via several law enforcement stings. In one case, Karla exchanged $400,000 in cash for bitcoin with an undercover agent who told him the proceeds were from drug trafficking. On another occasion, he sold two pounds of meth and exchanged $50,000 in bitcoin for cash with another agent.
With Karla’s arrest, authorities seized $889,000 in cash from his bank accounts and a vehicle, as well as 54.3 bitcoin and other cryptocurrencies.
Karla pled guilty to four felonies: distribution of methamphetamine, operating an unlicensed money transmitting business, laundering of monetary instruments and failure to maintain an effective anti-money laundering program. It’s not entirely clear what the plea deal is in this case, but the charges have a maximum possible sentence of life in federal prison.
Although it’s not the first case of this nature, it emphasizes once again that a commercial level of sales through sites such as LocalBitcoin require licensing under U.S. law.
A similar case, albeit not as large, was that Theresa Lynn Tetley, a woman sentenced to one year in jail in after being found guilty of operating an unregistered money exchange business and a failure to comply with the Financial Crimes Enforcement Network anti-money-laundering mechanisms in August 2018. In that case, Tetley was also trading bitcoin for cash on LocalBitcoins.
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