Theresa Tetley of Los Angeles, who operated under the pseudonym Bitcoin Maven, making USD 300,000 a year from 2014 to 2017 by dealing Bitcoin on Localbitcoins.com, now faces up to 30 months in prison for operating an unregistered money transmitting business. In total, she transacted USD 6 to 9.5 million in Bitcoin on the popular peer-to-peer Bitcoin trading website.
Tetley has already pled guilty to federal charges and is hoping for a sentence of only one year’s imprisonment. Prosecutors say Bitcoin Maven fueled a black market financial system that existed outside of regulations. Indeed, Bitcoin dealers in the United States must obtain a money transmitter license, much like the license Western Union has. This requires Bitcoin dealers to keep thorough records of customer identities and transaction amounts, to pay taxes, and to keep large reserves of money in the bank so that customers don’t lose their money if a transaction goes bad.
Prosecutors were able to trace one of Bitcoin Maven’s deals, a BTC 80 (then worth USD 70,000) transaction, directly to drug money. This was enough evidence to label her entire operation as money laundering and to seize all of her money as proceeds of illegal activities. The court is trying to take ownership of BTC 40, 25 bars of gold, and USD 292,264 seized in March 2018 from her.
Many other Bitcoin dealers have met similar fates, such as Detroit Bitcoin dealer Sal Mansy who got a year in jail after selling USD 2.4 million worth of Bitcoins, Localbitcoins trader Michael Lord who got nine years in prison and his father who got four years in prison, and Jason Klein who accidentally sold BTC 98 to undercover agents.
Most people who deal Bitcoins choose not to get a proper money transmitting license since collecting identity information scares customers away, and they don’t have enough money for the required reserve a money transmitter must keep. Essentially, US law requiring a money transmitter license has put individual Bitcoin dealers on the wrong side of the law and generally forced them out of business.
When it comes down to it, any active Bitcoin dealer who doesn’t follow regulations is likely to unknowingly launder money for illegal purposes. The main reason someone would use a Bitcoin dealer who charges a premium of 10-20% instead of an exchange or Bitcoin ATM that charges 5-10% is to remain anonymous or if they are unable to acquire a bank account legally.
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