Bitcoiners go to jail for OTC trading
The unclear regulations around direct trading in cryptocurrencies apparently spell the downfall of a Bitcoiner.
The unclear regulations around direct trading in cryptocurrencies apparently spell the downfall of a Bitcoiner. He faces at least 15 months in prison.
Mark Alexander Hopkins, also known as "Doctor Bitcoin" or under his Twitter handle Rizzn, faces up to 15 months in a federal prison sentence in the US. The reason: he ran a business in which he exchanged American dollars for Bitcoin for his clients using over-the-counter (OTC) trades. He informed his followers about it via a tweet on the way to prison.
The irony is that his crypto service was actually registered with FinCEN, the U.S. financial crime regulator, and therefore should be legitimate.
At the wrong time, in the wrong market
Mark Hopkins ran a company as an over-the-counter (OTC) Bitcoin trader. That means the over-the-counter crypto trading from wallet to wallet. Many in the crypto space are probably familiar with OTC trading related to crypto pumps. They often use individual traders instead of crypto exchanges for larger transactions, where they can swap Bitcoin and fiat currencies. This prevents price swings in the market. OTC trading is also often used by criminals. Due to relatively lax "Know Your Customer" (KYC) procedures, they can allegedly trade crypto anonymously with cash.
This was also the case with Mark Hopkins. Not him personally, but one of his clients allegedly swapped stolen money from a fraud without his knowledge. The whole case blew up, and investigators quickly pointed to Hopkins, accusing him of aiding and abetting. So the FBI raided the trader’s home on October 23, 2020, and seized his tech devices like mobile phones and laptops.
Just a misunderstanding?
Since he says he didn’t know he was dealing with a fraudster, Hopkins initially suspected a misunderstanding. He says he cooperated, answered agents’ questions transparently to clarify things. In his view, he hadn’t done anything wrong, so he expected a quick dismissal.
That changed when he was invited for further questioning by the FBI. Authorities allegedly stated they could charge him and his wife with conspiracy to commit fraud, risking up to 35 years in prison for both. So, to protect his wife, he agreed to plead guilty in June 2021 to exploiting an unregistered crypto exchange and negligently aiding and abetting fraud. This despite the fact that he knew he ran a registered business.
Unclear regulation
Hopkins had his Bitcoin trading View post on X with FinCEN, the government agency for financial crime and prevention.
As the operator of a money services business in the US, Hopkins apparently should have obtained a state-level license to qualify for KYC implementation, according to FinCEN. The problem: this isn’t allowed for a simple crypto peer-to-peer business, according to the current law in his state of Texas. So he apparently became a victim of a loophole in the system. Hopkins even accused the Department of Justice of keeping the law intentionally lax to reach small traders like him.
For Hopkins, the whole case was proof of the state’s "war on privacy". He felt like a dealer who was "pinned for weed while the rest of the nation moved on with legalization". In the thread’s conclusion, he called for clear blockchain laws.
Either way, the question remains: can someone dealing with funds from criminal activity on the blockchain truly be prosecuted? Since the Tornado Cash saga, the US seems to say yes. Under the latest sanctions, even the numerous addresses of celebrities who involuntarily received money from the mixing service should be prosecuted.
