Ontario Man Who Ran Multimillion-Dollar Unlicensed Bitcoin Exchange Business Sentenced to 3 Years in Federal Prison
SANTA ANA, California – A San Bernardino County man was sentenced today to 36 months in federal prison for operating an unlicensed business that exchanged at least $13 million in Bitcoin and cash, often for drug traffickers.
Hugo Sergio Mejia, 50, of Ontario, was sentenced by United States District Judge Cormac J. Carney. Mejia pleaded guilty on July 1 to one count of operating an unlicensed money transmitting business and one count of money laundering.
From May 2018 to September 2020, Mejia operated a virtual currency business that exchanged Bitcoin for cash, and vice versa, charging commissions for these transactions. Mejia never registered his business with the Financial Crimes Enforcement Network, a bureau with the United States Department of the Treasury that collects and analyzes information to combat financial crimes, including money laundering.
During the nearly 2½-year period, according to the plea agreement, Mejia exchanged at least $13 million.
Mejia also established companies to mask his true activity, including Worldwide Secure Communications LLC, World Secure Data, and The HODL Group LLC. Mejia advertised his business online and was referred to customers by word of mouth, communicating with them via encrypted messaging services and meeting them in person at coffee shops.
On several occasions between May 2019 and March 2020, Mejia met with a client, who was working with law enforcement, to exchange Bitcoin for tens of thousands of dollars in cash. On March 12, 2020, Mejia met with the client at a coffee shop in Irvine and facilitated the exchange of 14.273 Bitcoin for $82,150 in cash plus fees. During this meeting, the client informed Mejia that his primary customer was a methamphetamine buyer in Australia who purchased methamphetamine every four to six weeks and sold it in Australia for five times more than the average price in the United States.
Mejia and the client who was working with law enforcement conducted five Bitcoin-cash transactions that cumulatively exceeded $250,000.
“[Mejia] knew about the applicable regulations governing his money exchange business and purposefully flouted them,” prosecutors wrote in a sentencing memorandum. “That is because [Mejia] structured his money exchange business with the intent to establish an anonymous conduit for money laundering of drug trafficking proceeds.”
As part of his plea agreement with the government, Mejia agreed to forfeit all assets derived from the illegal conduct, including $233,987 in cash seized from residences in Santa Ana and Ontario, silver coins and bars, and approximately $95,587 in various cryptocurrency seized.
IRS Criminal Investigation and Homeland Security Investigations investigated this matter and received assistance from the Costa Mesa Police Department.
Assistant United States Attorney Jason C. Pang of the International Narcotics, Money Laundering and Racketeering Section prosecuted this case. Assistant United States Attorney Brett A. Whittlesey of the Asset Forfeiture Section handled the asset forfeiture portion of this case.