Unlicensed Exchange Conviction Leads to Seizure of 54 BTC

Kunal Kalra, a resident of Los Angeles, California, has pleaded guilty to running an unlicensed cryptocurrency exchange operation which catered to drug traffickers. 

An announcement published by the U.S. Department of Justice indicated that Kalra, who went by the pseudonyms “Kumar” and “Coinman,” has plead guilty to four charges, including operating an unlicensed money transmitting business, failure to maintain an anti-money laundering (AML) program, laundering of monetary instruments and distribution of methamphetamine. 

Illegal Bitcoin Activity

The release states that, between 2015 and 2017, Kalra converted cryptocurrencies to fiat currencies for “darknet drug dealers and other criminals” using a Bitcoin ATM. He reportedly exchanged over $25 million before he was apprehended. 

“Kalra knowingly operated a virtual currency exchange business where he exchanged U.S. dollars for Bitcoin and vice versa,” per the announcement. “Kalra admitted in his plea agreement that he exchanged Bitcoin for cash from criminals, including those who received Bitcoin from selling narcotics on the Darknet.”

The Justice Department added that, by refusing to implement an AML program, Kalra must have conducted the transactions with proper knowledge of the illicit businesses that his clients were engaged in and that he continued to help them move move their funds nonetheless.

Law enforcement officials seized about $889,000 in cash, along with “54.3 Bitcoin and other cryptocurrencies.” The Justice Department noted that Kalra faces a potential life sentence.

Unlicensed Cryptocurrency Exchange Busts

Kalra is the latest in a growing line of individuals indicted for running unregistered cryptocurrency exchanges in the U.S. 

In July 2019, for instance, William Green of Wall Township, New Jersey, was indicted for committing the same crime. In the official filing, Green was said to have operated Destination Bitcoin, an unlicensed exchange, which he used to convert crypto to cash for a small commission.

Bitcoin trader Eric Powers was similarly charged by the Financial Crimes Enforcement Network (FinCEN) in April 2019 for running a peer-to-peer cryptocurrency exchange without registering as a money services business.

The crackdowns mark a rise in uncertainty for cryptocurrency trading in the U.S. On the one hand, they demonstrate an increased effectiveness from authorities when it comes to these types of crimes. On the other, it signals stark risk for those who may turn to these solutions in order to buy cryptocurrency pseudonymously or anonymously.

In Kalra’s case, there appears to be clear evidence that bitcoin was being used to mask criminal activity.

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