On October 19th, the founder, administrator, and primary operator of a pair of virtual currency platforms was assessed a $60 million civil penalty by the Financial Crimes Enforcement Network (FinCEN) for violations of the Bank Secrecy Act (BSA) and its implementing of anti-money laundering (AML) regulations.
Larry Dean Harmon was indicted in the U.S. District Court for the District of Columbia earlier this year under allegations of money laundering at his company Helix, which he operated from 2014-2017. Helix was a bitcoin exchanger. Exchangers are a type of money service business and must comply with the general requirements of the BSA and AML regulations. Helix, according to the FinCEN allegations, also functioned as a bitcoin “mixer,” which allows customers to pay to send bitcoin in a manner that conceals the source of the owner of the virtual currency.
Helix “conducted over 1,225,000 transactions for its customers and was associated with virtual currency wallet addresses that sent or received over $311 million,” according to FinCEN. From June 2014 through December 2017, Helix operated in this manner on the darknet while violating the BSA’s registration and reporting requirements.
Specifically, Helix “(a) failed to register as a money services business; (b) failed to implement and maintain an effective [AML] program; and (c) failed to report certain suspicious activity,” FinCEN stated. The company did not develop an AML program, did not have a compliance officer, and never filed a single suspicious activity report (SAR) despite FinCEN identifying nearly 250,000 instances in which suspicious transactions took place. Helix also did not verify customer names, addresses, and other identifiable information and deleted the customer information it did collect for all transactions it facilitated, FinCEN alleges.
After Helix ceased operating in December 2017, Harmon founded and acted as CEO at Coin Ninja, which ran a business in a similar manner to Helix. Coin Ninja, still operating in 2020, was also not registered as a money services business. The $60 million penalty is the first to be levied by FinCEN against a bitcoin exchanger.