Operator Of Unlawful Bitcoin Exchange Sentenced To More Than 5 Years In Prison For Leading Multimillion-Dollar Money Laundering And Fraud Scheme
Joon H. Kim, the Acting United States Attorney for the Southern District of New York, announced that ANTHONY R. MURGIO was sentenced today by U.S. District Judge Alison J. Nathan to 66 months in prison for charges associated with operating Coin.mx, an internet-based Bitcoin exchange, through which MURGIO processed more than $10 million in illegal Bitcoin transactions. MURGIO pled guilty on January 9, 2017, to conspiring to operate an unlicensed money transmitting business, conspiring to commit wire fraud and bank fraud, and conspiring to obstruct an examination of the Helping Other People Excel Federal Credit Union (“HOPE FCU”) by the National Credit Union Administration (“NCUA”) in furtherance of the illegal Coin.mx scheme.
Acting U.S. Attorney Joon H. Kim said: “Anthony Murgio’s criminal business model consisted of a phony front company hiding an illegal internet Bitcoin exchange. Murgio laundered money, lied to banks, and took over a federal credit union to further his scheme. Murgio’s was an age-old fraud by new age means. And for his crimes, the court has sentenced him to over five years in federal prison.”
According to the Superseding Indictment to which MURGIO pled guilty, statements made during the plea and sentencing proceedings, and evidence admitted at a trial of two co-defendants:
The Unlawful Bitcoin Exchange
Between 2013 and July 2015, MURGIO knowingly operated Coin.mx, an unlawful internet-based Bitcoin exchange that he had founded, in violation of federal anti-money laundering laws and regulations, including those requiring money services businesses like Coin.mx to meet state licensing and federal registration requirements set forth by the United States Treasury Department. MURGIO and his co-conspirators engaged in substantial efforts to evade detection of their unlawful Bitcoin exchange by operating through a phony front company called the “Collectables Club.” MURGIO used the Collectables Club to open financial accounts in order to trick financial institutions into believing the unlawful Bitcoin exchange was simply a members-only association of individuals who discussed, bought, and sold collectible items and memorabilia.
In addition to lying to banks to open accounts, MURGIO and his co-conspirators deceived financial institutions by deliberately misidentifying and miscoding Coin.mx customers’ credit and debit card transactions, in violation of bank and credit card company rules and regulations. MURGIO and his co-conspirators also instructed Coin.mx customers to mislead banks about the nature of the credit and debit card transactions the customers executed through Coin.mx. For example, MURGIO and his co-conspirators caused customers to mislead banks by reporting that the transactions in which they engaged with Coin.mx were for collectibles items, when in reality they were for Bitcoin. Through the illegal Coin.mx scheme, MURGIO and his co-conspirators caused more than $10 million in Bitcoin-related transactions to be processed illegally through financial institutions.
The Federal Credit Union Scheme
In 2014, in an effort further to evade scrutiny from financial institutions about the nature of the business engaged in by Coin.mx, MURGIO and his co-conspirators gained control of HOPE FCU, a federal credit union in New Jersey with primarily low-income members. After making more than $150,000 in illegal bribes at the direction of Trevon Gross, the then-chairman and CEO of HOPE FCU, MURGIO and his co-conspirators took control of HOPE FCU. With Gross’s assistance, MURGIO installed various co-conspirators on HOPE FCU’s board of directors and transferred Coin.mx’s banking operations to HOPE FCU. Gross also ceded operational control of the credit union to the board members installed by MURGIO. Thereafter, MURGIO and others worked to process tens of millions of dollars of Automated Clearing House (“ACH”) transactions through the credit union without adequate controls, thus putting its financial condition at risk.
MURGIO and his co-conspirators also obstructed an examination of HOPE FCU by the NCUA and made false statements to the NCUA in order to perpetuate MURGIO’s control of the credit union. These included deliberately failing to disclose the bribe payments; misrepresenting the location of Coin.mx-affiliated businesses, including the “Collectables Club,” so as to claim that they were eligible to be members of the credit union and to serve as Board members; and manipulating the accounting at HOPE FCU so as to hide its true financial condition and the fact that it was processing tens of millions of dollars of transactions without adequate controls. HOPE FCU was operated as a captive bank by MURGIO and his co-conspirators until the end of 2014.
In October 2015, the NCUA placed HOPE FCU into conservatorship, and subsequently liquidation.
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In addition to the prison sentence, MURGIO, 33, of Tampa, Florida, was sentenced to three years of supervised release.
All five of MURGIO’s co-defendants have been convicted and have been sentenced or are awaiting sentence by Judge Nathan.
Jose M. Freundt pled guilty on October 13, 2016, to operating an unlicensed money transmitting business, conspiring to operate an unlicensed money transmitting business, making corrupt payments to an officer of a financial institution, conspiring to make corrupt payments to an officer of a financial institution, wire fraud, and conspiring to commit wire fraud. Freundt is scheduled to be sentenced on September 15, 2017.
Michael J. Murgio pled guilty on October 27, 2016, to conspiring to obstruct an NCUA examination of a financial institution, and was sentenced on January 27, 2017, to one year of probation and a $12,000 fine.
Ricardo Hill pled guilty on January 17, 2017, to operating an unlicensed money transmitting business; conspiring to operate an unlicensed money transmitting business; making corrupt payments to an officer of a financial institution; conspiring to make corrupt payments to an officer of a financial institution, to receive corrupt payments by an officer of a financial institution, to obstruct an NCUA examination of a financial institution, and to make false statements to the NCUA; wire fraud; bank fraud; and conspiring to commit wire fraud and bank fraud. Hill is scheduled to be sentenced on July 17, 2017.
Trevon Gross and Yuri Lebedev were convicted after trial by a jury on March 17, 2017, of conspiring to make corrupt payments to an officer of a financial institution, to receive corrupt payments by an officer of a financial institution, to obstruct an NCUA examination of a financial institution, and to make false statements to the NCUA. Gross was also convicted of the receipt of corrupt payments by an officer of a financial institution. Lebedev was also convicted of making corrupt payments to an officer of a financial institution, wire fraud, bank fraud, and conspiring to commit wire fraud and bank fraud. Gross and Lebedev are scheduled to be sentenced on September 1, 2017.
Mr. Kim praised the outstanding investigative work of the Federal Bureau of Investigation and the United States Secret Service. He also thanked the NCUA for its assistance with the investigation and prosecution.
This case is being handled by the Office’s Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys Eun Young Choi, Daniel S. Noble, and Won S. Shin are in charge of the prosecution.