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May 11, 2018Seattle, United StatesFinancial Crimes

Canadian who operated bitcoin trading business sentenced

Defendant engaged in bitcoin exchanges knowing the money was drug trafficking proceeds

SEATTLE – A Vancouver, British Columbia man was sentenced in federal court Friday to 20 days of incarceration and more than $1 million in forfeitures for operating an unlicensed money transmission business. The case is the result of a probe by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI).

Louis Ong, 37, was arrested in July, following a series of bitcoin for cash sales with an HSI special agent. Ong repeatedly told the agent that he did not want to know the source of the cash so that he would have ‘plausible deniability.’ Even after Ong registered as a money transmitter, he made little effort to comply with regulations regarding the reporting of suspicious transactions.

According to court records, HSI special agents responded to an ad Ong had placed regarding buying and selling bitcoin – a cryptocurrency that can be used for purchases on the dark web and elsewhere. Later in December, and again in February and March 2017, Ong traveled to the Seattle area to exchange cash for bitcoin, and where he was repeatedly told that the funds being exchanged came from drug trafficking. He steadfastly refused to acknowledge the source of the funds so he could claim “plausible deniability.”

The dark web is not a free pass for crime and mayhem,” said Annette L. Hayes, U.S. Attorney for the Western District of Washington. “As this defendant knew full well, the laws and rules apply to crypto currency dealings just as they do to other types of financial transactions. I commend HSI for their ongoing work to police the Internet – including the Dark Web – to root out those who undermine public safety for all of us.”

In May 2017, Ong was observed by other HSI agents in Blaine, Washington running cash through a bill counter while sitting in his car. The agents informed him he needed to register as a money remitter with FinCEN, a bureau of the U.S. Treasury whose mission is to safeguard the financial system from illicit use and money laundering. Ong registered with FinCEN, and informed HSI that he had done so. However, even after registering, he failed to follow FinCEN regulations requiring the reporting of suspicious transactions – including three more with HSI agents.

Ong was arrested in the midst of his sixth financial transaction with agents. After each of the exchanges for bitcoin, the agents used licensed cryptocurrency exchanges to return the government funds to cash. As part of his plea agreement, Ong is forfeiting both cash and bitcoin now valued at more than $1 million.

Ong was indicted on August 16, 2017 and pleaded guilty on February 15, 2018. He was released on bond to reside with his sister in Los Angeles, Calif. after being held for 20 days at the Federal Detention Center, SeaTac. While in Los Angeles, he volunteered with a variety of homeless organizations and today tearfully told the court he now realizes “how his actions (as an illegal money transmitter) facilitated more people being exposed to addictive substances.”

At the sentencing hearing, U.S. District Judge Robert S. Lasnik imposed three years of supervised release and noted that Ong will likely be unable to return to the U.S. from Canada.