Mark Alexander Hopkins, known as “Doctor Bitcoin,” pled guilty in the Northern District of Texas on June 29, 2021, to illegally operating a cash-to-cryptocurrency conversion business. According to a press release from the Department of Justice (DOJ), Hopkins pled guilty to one count of operation of an unlicensed money transmitter business.
Hopkins ran a business that converted US dollars to cryptocurrency, primarily Bitcoin, for a fee. Money transmitter businesses fall under the money services business (MSB) umbrella and are subject to federal requirements. MSBs are required to register with FinCEN in an effort to mitigate the risks of criminal abuse of MSBs for money laundering and terrorist financing. MSBs must establish and maintain an anti-money laundering program, and submit Suspicious Activity Reports for financial transactions above $2,000 if the source of the cash is suspected to be illegal.
Hopkins failed to register his business as an MSB, and also failed to implement anti-money laundering and know-your-client measures. He failed to follow federal laws that require money transmitter businesses to verify customers’ names, dates of birth, and addresses, and he failed to verify the sources of funds sent to him for conversion. His actions facilitated online scammers’ use of cryptocurrency to evade the law.
In one specific example provided in the charging documents, Hopkins processed transactions for a customer, identified as “M.H.” in court filings, who sent funds connected to a Nigerian lottery scam. An individual in Nigeria would solicit victims to send funds to M.H., who then sent those funds to Hopkins for conversion into Bitcoin. Other than asking for a form of identification, Hopkins failed to verify the source of the funds M.H. sent. According to DOJ’s statement of facts released with the charging document, Hopkins explicitly told M.H. that he was turning a blind eye to the specifics of M.H.’s transactions, saying “I don’t want to get into details of whatever business [customers] are involved in.” Additionally, he instructed M.H. on how to avoid bank reporting requirements by structuring each transaction to each be less than $9,500, and misrepresenting the payments to financial institutions as being related to a marketing campaign. Banks are required to report to the IRS deposits of $10,000 or more in a single transaction
Over the course of about a year, Hopkins converted “between $550,000 and $1.5 million” through 37 transactions for M.H and now faces up to five years in federal prison. The case is United States of America v. Mark Hopkins, case number 3:21-cr-00144, in the .. District Court for the Northern District of Texas, Dallas Division.
In light of this decision, practitioners with a money transmitter business—particularly ones related to cryptocurrency transactions—should be mindful of performing customer due diligence to make sure their business is not being used for criminal activities. As Acting US Attorney Prerak Shah stated, the DOJ is “determined to rid the Bitcoin marketplace of anyone who knowingly helps criminal actors stash illegal profits inside crypto wallets.”
*Halyna Hnatkiv is a law student at New York University School of Law who joined Hunton Andrews Kurth as a Summer Associate in 2021.