Cryptocurrency Conversion Business Pleads Guilty to Federal Cyber Violations

Mark Alexander Hopkins, known as Doctor Bitcoin, pleaded guilty to the Northern District of Texas on June 29, 2021, of illegally operating a cash-to-cryptocurrency business. Hopkins pleaded guilty to running an unlicensed money-sending business, according to a DOJ press release.

Hopkins ran a company that exchanged US dollars for cryptocurrency, mostly Bitcoin, for a fee. Money transmitter businesses come under the Money Services Business (MSB) umbrella and are subject to state requirements. MSBs must register with FinCEN to reduce the risk of criminal misuse of MSBs for money laundering and terrorist financing. MSBs must establish and maintain an anti-money laundering program and file reports of suspicious activity on financial transactions above $ 2,000 if the source of funds is suspected to be illegal.

Hopkins has failed to register its company as an MSB and has failed to take anti-money laundering and awareness measures. He failed to comply with federal laws requiring money senders to verify customers’ names, dates of birth, and addresses, and he failed to verify the sources of the funds sent to him for conversion. His actions made it easier for online scammers to use cryptocurrency to circumvent the law.

In a specific example in the fee documents, Hopkins was processing transactions for a customer referred to as “MH” in court records who was sending funds related to a Nigerian lottery scam. A person in Nigeria would ask victims to send money to MH, who then sent those funds to Hopkins for conversion into Bitcoin. Aside from asking for ID, Hopkins was unable to verify the source of the funds sent by MH. According to the DOJ’s statement of facts published with the indictment, Hopkins explicitly told MH that he had ignored the details of MH’s transactions and said, “I don’t want to go into detail whatever the deal [customers] He also instructed MH on how to avoid bank reporting requirements by structuring each transaction so that each transaction is less than $ 9,500 and misrepresenting payments to financial institutions as being related to a marketing campaign Banks must report deposits of $ 10,000 or more to the IRS in a single transaction

Over the course of about a year, Hopkins turned over “between $ 550,000 and $ 1.5 million” through 37 transactions for MH and now faces up to five years in federal prison. The case is United States v Mark Hopkins, Case Number 3: 21-cr-00144, in the District Court for the Northern District of Texas, Dallas Division.

Given this decision, practitioners with a money sender business – especially those related to cryptocurrency transactions – should be careful to perform customer due diligence to ensure that their business is not used for criminal activity. As incumbent US Attorney Prerak Shah stated, the DOJ is “determined to rid the Bitcoin marketplace of anyone who knowingly helps criminal actors hide illegal profits in crypto wallets.”

* Halyna Hnatkiv is a law student at New York University School of Law who joined Hunton Andrews Kurth as a Summer Associate in 2021 and contributed to this article.

Copyright © 2021, Hunton Andrews Kurth LLP. All rights reserved.National Law Review, Volume XI, Number 189