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U.S. Attorney Annette L. Hayes announced that Louis Ong, 37, had been sentenced for effectively laundering millions of dollars in Bitcoin for undercover agents who had indicated their money originated from a successful drug distribution operation. U.S. District Judge Robert S. Lasnik sentenced the man to three years of supervised release, suspended with 20 days in jail and a $1 million forfeiture. Ong was arrested in July 2017 for Operating an Unlicensed Money Transmission Business.
Ong, however, registered as a currency exchanger with FinCEN, the government agency responsible for regulation regarding money laundering, terrorist financing, and various financial fraud activities. Many know of the “Know Your Customer” (KYC) or “Anti-Money Laundering” (AML) laws that make dealing with some cryptocurrency exchanges a complicated mess. FinCEN, or the Financial Crimes Enforcement Network, established those laws, including those that cover the regulation of cryptocurrency.
U.S. Attorney Annette L. Hayes reminded the public that the darknet was not a “free pass for crime and mayhem.” She failed to connect the dots between Bitcoin exchanges and “mayhem.” The attorney added, “this defendant knew full well [that] the laws and rules apply to crypto currency dealings just as they [apply] to other types of financial transactions.” Throughout the course of the operation, Homeland Security Investigations agents told Ong what he needed in order to legally—or legitimately—exchange Bitcoin for cash.
Court documents revealed that federal agents began their investigation into Ong in 2016. Federal agents had found an advertisement on the internet where he had offered to exchange Bitcoin for cash. For a fee. In February and in March 2017, Ong met with Homeland Security Investigations agents to exchange their Bitcoin. Even though Ong repeatedly informed the agents that he did not want to know where their Bitcoin had come from, the agents repeatedly informed him that they had earned the Bitcoin through drug distribution.
Months later, Homeland Security Investigations informed Ong that if he planned to continue exchanging currencies, he needed to register as a currency exchanger with FinCEN. Ong registered and informed Homeland Security that he had indeed taken the steps needed for legitimizing his growing business. (A business growing due to the influx of Bitcoin from Homeland Security Investigations agents.)
After he had registered with FinCEN, Ong reportedly “failed” to report transactions deemed “suspicious” by the HSI agents behind the transactions. The agents wrote that they had informed Ong several times that they needed their funds laundered, and they were from drug related crimes. He maintained that he had no interest in knowing the origin of their funds. He wanted, in his own words, “plausible deniability.”
The agents conducted three transactions prior to the FinCEN registration. After the sixth transaction, HSI agents arrested Ong. He was indicted on August 27, 2017. He pleaded guilty to Operating an Unlicensed Money Transmission Business on February 15, 2018.
In court in May, U.S. District Judge Robert S. Lasnik listened to Ong’s apology and apparent remorse. He sentenced the man to a suspended sentence and a fine of $1 million.