May 28, 2017

LocalBitcoins Trader Pleads Guilty to Money Transmitter Charge

A Michigan LocalBitcoins trader plead guilty last week to operating an unlicensed money services business.

Federal prosecutors alleged that Sal Mansy, a resident of Detroit, advertising a bitcoin buying and selling service through LocalBitcoins, conducting $2,400,000 worth of business between August 2013 and July 2015.

According to court documents, undercover agents engaged in two trades between December 2014 and March 2015 with Mansy, for an amount totaling roughly 6.32 BTC – an amount worth a total of just under $1,900 at then-current prices.

Mansy is the second user of LocalBitcoins to plead guilty to the unlicensed money service charge this month. Missouri resident Jason Klein plead guilty to selling bitcoin to undercover agents on five separate occasions, and a seller from Rochester, New York named Richard Petix plead guilty to the same charge a week prior.

Court documents detail how Mansy would purchase bitcoin through digital currency exchanges Coinbase and Bitstamp, later selling the digital currency on LocalBitcoins and depositing the proceeds into bank accounts connected to a company he operated, TV TOYZ, which was also named in the government’s lawsuit.

Coinbase, according to a prosecutorial filing from 15th May of this year, closed Mansy’s account in June 2014 after questioning him about the nature of his account. Communications between Mansy and support staff for Coinbase and Bitstamp were included in that document, showing how both exchanges raised questions about Mansy’s bitcoin purchases and whether he had registered with the US Financial Crimes Enforcement Network (FinCEN) as a money transmitter.

The prosecutorial document shows that Mansy argued, in discussions with the US Department of Homeland Security, that he wasn’t operating a money transmission business.

“According to Mansy, he had looked up the money service business requirements on the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) website and determined that his business model did not apply to that of a money service business,” the filing stated.

Mansy faces as many as five years in prison and $250,000 in fines at sentencing later this year.