Combine cyber currency and tax fraud and what do you have? The answer is number six on the IRS countdown of the top ten criminal tax investigations of 2021.
In May of 2022, cryptocurrency tanked all on its own. The notoriously unstable digital currency is a darling of those able to ride the heady highs and lows of a decentralized financial system. In addition to the liberty from a central authority, crypto is highly mobile, easily exchanged in the digital world, and promises anonymity—sort of. But what goes down often comes up, as crypto has for years—drawing speculators, serious investors, and those looking to get rich in the Wild West of alternative finance.
An enterprising California businessman combined crypto with old-fashioned money laundering to create an under-the-table business that serves shady dealers, including drug traffickers. Mr. Hugo Sergio Mejia operated his Bitcoin exchange between May 2018 and September 2020. Mr. Mejia exchanged cash for cyber coin, and coin for cash, operating virtually behind shell companies and meeting clients when needed in coffee shops.
Laundering money is, of course, a criminal tax matter and is likely to draw the interest of the IRS. In addition, Mr. Mejia ran afoul of compliance obligations like registering with the Financial Crimes Enforcement Network (FinCen).
Between May 2019 and March 2020, Mr. Mejia did business with a client interested in exchanging Bitcoin for cash. During the transactions, the client (a law enforcement agent) revealed the money supported the drug transactions of a meth dealer in Australia. Overall, Mr. Mejia completed five transactions worth about $250,000. Mr. Mejia earned a commission on each deal as well. The IRS estimates Mr. Mejia exchanged $13 million during his brief run.
The luck ran out for Mr. Mejia and he was charged and pled guilty to two felony counts in January 2021. Late in 2021, Mr. Mejia was sentenced to three years in federal prison, forfeiting all assets obtained through the enterprise, as well as $234,000 in cash, silver bars, and coins, along with $95,587 in cryptocurrency.
Of Mr. Mejia, the prosecutor wrote, “[he] knew about the applicable regulations governing his money exchange business and purposefully flouted them. That is because [Mejia] structured his money exchange business with the intent to establish an anonymous conduit for money laundering of drug trafficking proceeds.”
Mr. Mejia worked at a job that did not pay, and eventually lost his liberty and assets as a result. If you are involved in a criminal tax endeavor, speak with an experienced criminal tax defense attorney for help before it turns out that your next client is the IRS.
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