california - Pwim.Net

California Man Pleads Guilty to Running Illegal Bitcoin ATMs and Money Laundering

The US Department of Justice has accepted a guilty plea from a Californian man for operating a money laundering and illegal Bitcoin business.

According to a plea agreement filed Wednesday, July 22 in federal court, 36-year old Kais Mohammad, also commonly recognized as “Superman 29”, has agreed to plead guilty to one count each of operating money laundering, unlicensed money transmitting business, and failing to maintain an effective AML (anti-money laundering) program.

Law Enforcements Spot and Study Patterns to Catch Criminals

Federal investigators revealed that Mohammed owned and operated HeroCoin, which was an illegal digital currency money services business, exchanging Bitcoin cryptocurrency for cash and charging commission rates of up to 25% that were “significantly above” the market rate.

The company also operated Bitcoin ATM kiosks in multiple retail centers, including convenience stores, gas stations, and malls throughout San Bernardino, Riverside, Los Angeles, and Orange counties. Such kiosks allowed customers to either sell Bitcoin in exchange for cash or buy Bitcoin with cash that would be dispensed on site.

Prosecutors claimed that Mohammad knew at least some of his clients’ funds were obtained through illegal activities.

As part of his plea agreement, Mohammad admitted to having exchanged more than $25 million through the firm.

Prosecutors alleged that Mohammad intentionally failed to register the firm with the U.S Department of Treasury’s Financial Crime Enforcement Network (FinCEN) or develop an effective anti-money laundering program.

Prosecutors also claimed that being a former banker, Mohammad was aware, but ignored regulations related to reporting requirements for digital currency exchanges. Regulations required Mohammad to report exchanges of currency bigger than $10,000 or any transactions over $2,000 involving customers suspected to be involved in criminal activities. But Mohammed ignored complying with these regulations.

According to court records, law enforcement officials conducted several transactions with Mohammad as a way of carrying out their investigations. One undercover agent bought $14,500 value of Bitcoin cryptocurrency during three successive transactions at a Bitcoin ATM kiosk located in Lakewood.

As per the U.S attorney’s office, Mohammad once again met in person with undercover agents who represented themselves that they worked at a ‘karaoke bar, which employed beautiful women from Korea who entertained men in several ways, including engaging in sexual activity. Mohammed agreed to accept $16,000 in cash from one of the undercover agents in exchange for Bitcoin, prosecutors reported.

Prosecutors alleged that Mohammed did not file the required currency transaction reports nor a suspicious activity report, in relation to the exchanges involving the undercover agents.

So far, no hearing date has been scheduled for Mohammad to enter a plea of guilty. He faces a maximum sentence of 30 years in federal prison. He has agreed to forfeit cryptocurrency, cash, and 17 Bitcoin ATMs that he used for his business operations.

Laundered Cryptocurrency Washed with Exchange Services

Chainalysis report reveals that a majority of criminally-connected cryptocurrencies are laundered on basic online exchange services. In 2018, doge cryptocurrencies amounted to more than $1 billion were washed by simply depositing them onto digital asset exchanges and trading them. Money launders utilized other p2p (peer-to-peer) exchange services to clean a further 12% of their illegal proceeds. This implies that over 75% of illegal cryptocurrencies were moved through an online exchange service in 2018.

The majority of illicit money flowed through either peer-to-peer exchanges or crypto exchanges, with others flowing through conversion services like gambling sites, mixing services, and Bitcoin ATMs.

Most of the digital currencies were acquired by hacking crypto exchanges directly. In 2018, about $36 million value of Ethereum was stolen through exit scams, Ponzi schemes, or phishing.

California Crypto Bill Seeks to Measure the Consumer Impact of Digital Assets

California’s Senate Banking and Financial Institutions Committee has passed a bill that will help define digital assets and measure its potential impact on the state and consumers. The Bill dubbed Assembly Bill 2150 was sponsored by California Assembly Majority Leader Ian Calderon (D-Whittier) and will see the Department of Business Oversight supervise a report that will bring clarity in blockchain technology, digital currencies, and their derivatives.

The report which is expected to be released by January 1, 2022, will point out the pros and cons of digital currencies which will potentially impact how digital assets can be integrated into the California economy.

Noting the importance of the bill in California, a state with a surge in cryptocurrency outfits, Blockchain Advocacy Coalition (BAC) board member Ben Weiss, an avid supporter of the bill believes that the bill “AB 2150 is a step towards fostering an innovative business climate in California, without jeopardizing consumer protections, California is a giant economy whose regulatory approach will have impacts worldwide. The state will lead the federal government that is slow to provide regulatory clarity. If we don’t act now, we will continue to lose much-needed businesses and jobs to countries that have moved quicker in this sector.”

A Proper Classification of Digital Assets is Imperative

The United States’ disposition towards digital assets under President Donald J. Trump has placed China ahead particularly with respect to its eYuan development.

The proponents of the California Assembly Bill 2150 believes that such a bill will help influence the United States government to take similar actions. Major stakeholders in the US want regulators to step up in a bid to meet the growing market demand for digital assets.

Through the first half of 2020, United States federal regulators, including the Commodity Futures Trading Commission (CFTC) rolled out regulations that are bullish on crypto and digital assets.

California Signs Executive Order to Formulate Crypto Regulations

California State announced that state agencies will work with the federal government to formulate digital currency regulations before officially accepting cryptocurrencies.

Governor Gavin Newsom signed an executive order requiring agencies to coordinate and co-create regulations for digital currencies and explore blockchain computer codes, which are expected to be incorporated into government operations.

California has 39 million residents and many financial and technology companies such as PayPal and Square are based in the state. CA’s economy is worth more than $3.1 trillion, surpassing countries like the UK and India.

The signing of the decree would formally conduct researches and regulations on cryptocurrencies and will help legalize blockchain technology and bring it into the mainstream.

Newsom said in a statement:

“Too often government lags behind technological advancements, so we’re getting ahead of the curve on this, laying the foundation to allow for consumers and business to thrive.”

The executive order aims to make California the first state in the country to establish a comprehensive, thoughtful, and coordinated regulatory and business environment for crypto assets, Newsom said.

California’s Senate Banking and Financial Institutions Committee have passed a bill that will help define digital assets and measure their potential impact on the state and consumers in 2020.

The California administration becomes the latest government official to speak about Bitcoin in a public address. Newsom asked the public to remain cautious against Bitcoin fraudsters who try to capitalize on the coronavirus fears.

‘Multiple’ Crypto Lending Firms Are Under Investigation, Says California Regulator

California Department of Financial Protection and Innovation (DFPI) announced on Tuesday that it is investigating several firms nationwide that provide customers with interest-bearing crypto-asset accounts services (crypto-interest accounts).

The watchdog said that some of these firms are preventing customers from withdrawing and transferring funds between their accounts due to the difficult market conditions.

The regulator warns California consumers that many crypto-interest account providers may not have adequately disclosed risks facing customers who deposit their funds into such platforms. The department mentioned that the same rules do not govern crypto interest platforms as banks and credit unions, which require deposit insurance.

Based on the recent issues facing crypto lenders such as BlockFi and Voyager Digital, DFPI has identified some crypto-interest accounts that are unregistered securities. The regulator said that it is also investigating whether other crypto interest platforms are violating laws under the Department’s jurisdiction.

DFPI encourages consumers to diligently assess the appropriateness of an investment before responding to any solicitation offers. The watchdog has advised California customers of crypto interest platforms that have suspended withdrawals or transfers of crypto assets to contact the regulator for questions or inquiries and may file a formal complaint with the department.

Crypto Credit Crisis

The move by California’s DFPI follows recent action by state securities regulators in Alabama and Texas to have launched efforts designed to investigate crypto lending firms Celsius Network and Voyager Digital.

Last week, Joseph Rotunda, the enforcement director at the Texas State Securities Board, announced that the regulator started investigating whether these firms properly disclosed how they were handling clients’ funds and looking into potential cases of improper risk disclosure.

On June 12, Celsius Network abruptly suspended customer withdrawals after facing liquidity concerns. Last week, Voyager Digital was forced to file for bankruptcy after the collapsed hedge fund firm Three Arrows Capital failed to pay back its $650 million loans. Voyager became the second high-profile crypto firm to follow Three Arrows Capital in filing for bankruptcy in recent days.

Other crypto lenders that have recently faced solvency issues, including CoinFLEX, CoinLoan, and Babel Finance – all have halted customer withdrawals.

Chaos has continued to rise in the world of crypto lending, with BlockFi also witnessing a liquidity crisis. Crypto lending firms and hedge funds have fallen into trouble because of the current market turbulence, but mainly due to their poor management practices.

Campaigners In California Can Now Receive Donations in Cryptocurrency

California campaigners may now receive donations through Bitcoin (BTC) and other cryptocurrencies.

The candidates for both local and state offices in the state can now breathe a sigh of relief as the state’s campaign regulator has lifted a four-year ban on crypto donations and contributions.

According to the regulation document, there should be plans to receive any such donations through a payment processor. This will be registered with the United States Treasury Department under the Financial Crimes Enforcement Network (FinCEN).

Unanimously, the members of the California Fair Political Practices Commission voted to revoke the ban that had been active for years. Instead, they voted to develop new regulation that will supervise the activities of crypto donations. During the July meeting held by the commission, David Bainbridge the general counsel of the legal division mentioned that this is a new and ever-changing era for the western U.S. state.

In addition, Bainbridge explained that a need to adjust the regulation may arise soon as development comes to the industry. In the meantime, he believes the current regulation will do justice to the inflow of crypto contributions without violating any law.

Receiving Crypto Donations Via the Payment Processor

The payment processor will be used to conduct know-your-customer (KYC) verification to ascertain the identity of every donor. Functioning optimally, the payment processor must retrieve personal contributors’ data like name, address, employer, and occupation.

The regulation states that “A person may make, and a committee may solicit, a contribution of cryptocurrency as an in-kind contribution if the cryptocurrency is converted to dollars upon the making of the contribution”.

The contributions are expected to not exceed a limit that had already been stated. Every donation, once converted to U.S. dollars, should be transferred to the beneficiary campaign bank account within 24 hours of the time the contribution was made. The conversion will be done based on the prevailing exchange rate at that time.

When reporting the crypto contributions, the reported amount will be the fair market value of the cryptocurrency at the time the donation was made to the payment processor.

Eventually, the California commission regulation will take its full course within the next 60 days.

California Gov Vetoes Digital Currency Licensing Bill

California Governor Gavin Newsom has vetoed Bill 2269 proposed by State Congressman Tim Grayson on the grounds that a more flexible approach is needed to address crypto regulations.

The bill is originally billed to impress virtual currency service providers to obtain a license before they start operating in the state. The bill seeks to establish California as a state issuing BitLicense just like New York.

“It is premature to lock a licensing structure,” Newsom wrote in a recent letter to the California State Assembly. “A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases and is tailored with the proper tools to address trends and mitigate consumer harm.”

Governor Newsom was also concerned about the financial implications of putting the Bill to work, which he noted the state was not prepared for at this time.

According to him, introducing a new regulatory approach is “a costly undertaking, and this bill would require a loan from the general fund in the tens of millions of dollars for the first several years. Such a significant commitment of general fund resources should be considered and accounted for in the annual budget process.”

California is one of the most forward-thinking states in America for crypto-related advancements. With the rise in the level of adoption of digital currencies in the state, Gov Newsom warned crypto users of the high rate of scams in the ecosystem back in March 2020.

From issuing Executive Order to establish crypto regulations by Gov Newsom to introducing a crypto bill to measure the impact of digital assets on consumers. With the veto placed on Grayson’s Bill, the lawmakers will have to go back to the drawing board and take the advice of the governor, who is advocating for an alternative approach to handling crypto at this time.

California Cannabis Grower Using Blockchain For Tracking

A cannabis nursery located in California has used blockchain technology and smart contracts in order to confirm the genuineness of the therapeutic plants they sell.

The cannabis nursery, which goes by the name Mendocino Clone Company, was given its moniker on January 13 in a statement about a cooperation between the EMTRI project and the technology company Global Compliance Applications.

To issue a batch certificate for each and every clone, also known as a baby plant, it will be necessary to make use of the capabilities offered by the blockchain project. Nurseries are businesses that focus on plant genetics and produce clones, young plants, and seeds for the purpose of wholesale distribution of cannabis. Nurseries may also be referred to as seed banks.

As a result of this decision, the nursery is now in a position to record the starting stages of a cannabis plant’s path to become a premium product for customers depending on the gram weight it blossoms, as the company said in a statement. Each clone batch has its own unique batch certificate, which functions as a self-generating smart contract. It does so by providing each young plant with its very own “unique identification block,” which is generated by the nursery and connected to the blockchain that it operates on using Ethereum.

It was noted that its customers, who include retail dispensaries and commercial farms, may utilize this to check the genetic history of their clones and determine whether or not their clones are real. Beginning the first week of February, a first round of batch certificate clones will be made accessible to the public.

Additionally, licensed farmers that acquire Mendocino clones will gain access to EMTRI token (EMT) awards and higher rates for engaging in the blockchain project. These benefits will be awarded to licensed cultivators who participate in the blockchain project.

In November of 2022, EMT was introduced as a means of providing incentives to project participants. The tokens may be staked for further dividends or exchanged on Uniswap for US Dollar Coins (USDC).

However, the idea of combining cryptocurrency with cannabis is not a novel one.

Cannaland, a cannabis-oriented Metaverse project, was initiated in November with the intention of developing a virtual environment catering to cannabis consumers and advocates. A bespoke pipe manufacturer produced tokenized bongs in January 2022, and celebrities such as Snoop Dogg and Santana were among the early adopters of the NFTs.

The California DMV is set to digitize car titles and title transfers

The Department of Motor Vehicles (DMV) in the state of California is conducting experiments with the use of a private Tezos blockchain to facilitate the digitalization of vehicle titles and title transfers.

The move is being made as part of a cooperation between the California Department of Motor Vehicles (DMV), the blockchain software company Tezos, and the blockchain software company Oxhead Alpha. Oxhead Alpha announced a successful proof-of-concept on January 25.

Oxhead Alpha has been contracted by the California Department of Motor Vehicles to build on a private Tezos testnet that the DMV has nicknamed a “shadow ledger.” Its primary purpose is to serve as a blockchain-based copy of the agency’s existing database, which has been its primary focus since its inception.

Ajay Gupta, the chief digital officer of the California Department of Motor Vehicles, told Fortune on January 26 that the department hopes to have the kinks worked out of the shadow ledger within the next three months.

After that, it intends to roll out apps such as digital wallets to keep and transfer nonfungible token vehicle titles, with the DMV serving as a mediator to monitor such processes. In addition to that, it is planning to roll out applications similar to the one described above.

According to an interview that Gupta gave to Forbes, “The DMV’s reputation of falling behind should surely alter.”

Andrew Smith, president of Oxhead Alpha, said that the California Department of Motor Vehicles’ (DMV) blockchain programme would serve a broad variety of use cases for the department, notably addressing the agency’s present paper-based systems and their eventual upgrade.

Smith gave many instances of fraudulent transactions, such as when automobile salesmen conceal essential information about the vehicle’s condition in order to sell a defective or “lemon” vehicle to purchasers who are not paying attention.

Smith pointed out that even while problematic autos in California have a special designation on their titles, dealers may easily relocate the vehicle to another state and conceal the faulty designations by doing so.

Smith said that it would be much simpler to monitor the true history of automobiles digitally if blockchain-based record keeping were used, in addition to the possibility that other DMVs might embrace the technology.

According to him, “this is a pretty apparent use case” for having a permanent digital title, which is one of the benefits of having such a title.

Smith explained in the company’s release on January 25 why Tezos was a good match for the DMV by stating that the blockchain “solves some of the very hard challenges in blockchain in an elegant manner.” Smith was commenting on why Tezos was a good fit for the DMV.

“The combination of responsible consensus, on-chain governance, and institutional grade security makes Tezos a perfect platform for providing production-ready solutions,” he added. “On Tezos, governance happens directly on the blockchain.”

The decision made by the California Department of Motor Vehicles is likely to be replicated by other governmental agencies in the state going ahead. In May of 2022, Governor Gavin Newsom of California issued an executive order to direct and investigate potential prospects for the integration of blockchain technology with state government institutions.

The governor said that “California is a worldwide powerhouse of innovation, and we’re setting up the state for success with this new technology.” This includes encouraging responsible innovation, safeguarding consumers, and harnessing this technology for the benefit of the public.

California's FPPC Updates Campaign Disclosure Rules, Including Cryptocurrency Contributions

The California Fair Political Practices Commission (FPPC) has made significant updates to its campaign disclosure manuals, including the introduction of detailed rules for cryptocurrency contributions. These new guidelines were revealed in the FPPC’s August 2023 agenda.

Under the new rules, cryptocurrency contributions are subject to applicable limits and must adhere to specific requirements. Contributions in cryptocurrencies may not be accepted from foreign principals, lobbyists, or anonymous sources. They must be received through U.S.-based payment processors registered with the U.S. Department of Treasury and the Financial Crimes Enforcement Network.

Payment processors are required to convert cryptocurrency contributions to U.S. dollars at current exchange rates and deposit the funds into the committee’s campaign bank account within two business days. Cryptocurrency contributions are labeled as non-monetary contributions, and any processing fee paid to the processor is not deducted from the reported amount.

In other matters addressed by the FPPC, the ACLU of Northern California was found to have violated Government Code Sections, leading to a proposed penalty of $6,500. The violations included failure to disclose reportable activity and improper disclosure statements on an advertisement.

The Commission also presented Proposed Regulation 18318, which delegates the authority to the Executive Director to settle monetary penalties for a lesser sum. Guidelines on the circumstances that warrant a settlement were also outlined.

Furthermore, proposed amendments to Regulations 18531.1 and 18537.1 were discussed to address the return, transfer, or carry-over of campaign contributions when a candidate withdraws or does not run in an election.

Lastly, the FPPC provided an update on audit requirements, the audit process, FY 2022/23 audits, and common audit findings, reflecting the Commission’s ongoing commitment to transparency and accountability in political practices.

These updates mark a significant step in California’s efforts to regulate political contributions, including the emerging field of cryptocurrency, ensuring a more transparent and accountable political financing system.

California Governor Signs Digital Financial Assets Bill, Tightening Crypto Regulations from July 2025

On October 13, 2023, California Governor Gavin Newsom signed Assembly Bill 39, enacting the Digital Financial Assets Law, aimed at establishing a comprehensive regulatory framework for cryptocurrency activities in the state. Set to be effective from July 1, 2025, the law mandates the Department of Financial Protection and Innovation (DFPI) to devise a stringent regulatory structure encompassing licensure and enforcement mechanisms for certain cryptocurrency operations.

The Governor emphasized the importance of the new law in providing a robust foundation to manage the burgeoning digital assets market. The bill entrusts the DFPI with rulemaking authority, along with an 18-month implementation timeframe to ensure a meticulously crafted regulatory architecture in sync with evolving industry trends and aimed at consumer harm mitigation.

The law is a proactive attempt to bolster consumer and investor protections, thereby minimizing fraudulent activities and ensuring accountability of malicious actors within the digital asset domain.

Under the new law, individuals and businesses engaging in commercial transactions involving digital assets are required to obtain a licensure from the DFPI. This move aims to bring transparency and compliance within commercial operations concerning digital assets, aligning California with the broader regulatory trends seen in various jurisdictions.

The law references existing Californian legislation governing money transmission, which mandates licensing by the DFPI for banking and transfer services operating within the state. Extending this requirement to cryptocurrency transactions signifies a concerted effort to uphold regulatory standards in the face of a rapidly advancing digital asset ecosystem.

Interestingly, this development contrasts with Governor Newsom’s previous stance in 2022, when he chose not to sign a similar bill aimed at establishing a licensing and regulatory framework for digital assets. Despite the lack of opposition during its debate in the California State Assembly, the Governor had then returned the bill unsigned, citing the necessity for a more agile framework to keep pace with the swiftly evolving cryptocurrency sector.