The U.S. Homeland Security has charged a LocalBitcoins seller with conducting an unlicensed money transmitting business after undercover agents exchanged over $140,000 in cash for bitcoin with the alleged criminal.
According to the criminal complaint, 26-year-old Kenneth Rhule has been advertising in-person cash-for-bitcoin exchanges on global peer-to-peer trading platform localbitcoins.com under the username “Gimacut93”.
Rhule made his first appearance in the U.S. District Court in Settle on Tuesday and now faces an eight-charge complaint including “conducting an unlicensed money transmitting business, five counts of laundering monetary instruments, and one count of conspiracy to produce and distribute marijuana.”
The complaint is the culmination of the agency’s long-term investigation efforts that first started in April 2018. Since then, undercover agents have been posing as criminals seeking laundering services and have had multiple in-person meetings with Rhule in locations like Starbucks. From April to Dec. 2018, Rhule helped undercover agents exchange over $140,000 in cash for bitcoin.
Notably, the agents explained to him that some of their cash came from human trafficking activities, but Rhule still proceeded to conduct business with them.
"When completing these transactions, Rhule did not ask any 'Know Your Customer' information," said the complaint. "In fact, Rhule conducted these transactions even after the undercover agent explained that at least a portion of the cash involved represented proceeds of human trafficking, in violation of 18 U.S.C. § 1956(a)(3).
Moreover, Rhule was also allegedly operating an unlicensed marijuana business and exchanging his marijuana products for cryptocurrency, the complaint said.
According to an announcement by the U.S. Attorney’s Office, while all allegations are still being investigated, Rhule could face up to five years in prison for operating an unlicensed money transmitting business, up to 20 years for laundering monetary instruments, and up to 40 years for his alleged involvement in marijuana distribution.