Can Bitcoin & Other Cryptocurrency Traders Be Charged With Money Laundering?, Well, The Feds Just Charged This Los Angeles Trader With This And More.
Do not think that just because digital exchanges are not broker-regulated by the IRS and digital exchanges are not obligated to issue a 1099 form reporting transactions, that your crypto currency transactions will always be a secret. The Federal government is cracking down on non-compliant traders and recently charged 50-year-old Theresa Tetley a/k/a the “Bitcoin Maven” who reportedly made $300,000 per year selling bitcoins without registering with the financial authorities.
Charges Filed Following Investigation By Federal Authorities
The U.S. Attorney’s Office for the Central District Of California (which serves Los Angeles) claims that Ms. Tetley processed 6 to 9.5 million dollars’ worth of bitcoins throughout her tenure. Operating as the “Bitcoin Maven” Ms. Tetley sold bitcoins between 2014 and 2017 using an online trading platform. The case, U.S. v. Theresa Tetley, U.S. Federal District Court, Central District Of California, Case Number: CR-17-738-R, is being heard by U.S. District Judge Manuel Real. Prosecutors are arguing to the Honorable Judge Real to sentence Ms. Tetley to at least 30 months in federal prison claiming that Ms. Tetley’s operations “fueled a black-market financial system in the Central District of California that purposely and deliberately existed outside of the regulated bank industry”.
18 U.S.C. §1956 – Laundering Of Monetary Instruments
18 U.S.C. § 1956(a) defines three types of criminal conduct: domestic money laundering transactions (§ 1956(a)(1)); international money laundering transactions (§ 1956(a)(2)); and undercover “sting” money laundering transactions (§ 1956(a)(3)). Crypto currency traders and marijuana-related businesses need to be aware of domestic money laundering transactions (§ 1956(a)(1)).
To be criminally culpable under 18 U.S.C. § 1956(a)(1), a defendant must conduct or attempt to conduct a financial transaction, knowing that the property involved in the financial transaction represents the proceeds of some unlawful activity, and the property must in fact be derived from a specified unlawful activity.
Violations of § 1956 have a maximum potential 20-year prison sentence and a $500,000 fine or twice the amount involved in the transaction, whichever is greater. There is also a civil penalty provision in § 1956(b) which may be pursued as a civil cause of action. Under this provision, persons who engage in violations of any of the subsections of 1956(a) are liable to the United States for a civil penalty of not more than the greater of $10,000 or the value of the funds involved in the transaction.
Each conviction for money laundering carries a maximum penalty of 20 years in prison, a $250,000 fine, or both. In Ms. Tetley’s case, prosecutors are also asking for a forfeiture of the 40 bitcoins confiscated during her arrest and 25 gold bars.
Of course once Ms. Tetley is done with the Federal criminal proceedings, she will likely have to face the Internal Revenue Service.
What Should You Do?
The IRS is always interested in teaming up with other Federal agencies in their investigations of non-compliance with the laws and with only several hundred people reporting their crypto gains each year, the IRS suspects that many crypto users have been evading taxes by not reporting crypto transactions on their tax returns. Don’t delay because once the IRS has targeted you for investigation – even if it is a routine random audit – it will be too late voluntarily come forward. Let the tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), San Francisco Bay Area (including San Jose and Walnut Creek) and offices elsewhere in California get you set up with a plan that may include being qualified into a voluntary disclosure program to avoid criminal prosecution, seek abatement of penalties, and minimize your tax liability.