LocalBitcoins User Pleads Guilty After Undercover Sting

A Local Bitcoins seller based in Missouri has plead guilty to running an unlicensed money transmission business.

AccessTimeIconMay 3, 2017 at 7:00 p.m. UTC
Updated Sep 11, 2021 at 1:17 p.m. UTC

A LocalBitcoins user based in Missouri has plead guilty to running an unlicensed money transmission business.

According to a statement from the US Attorney’s Office for the Western District of Missouri, Jason Klein plead guilty to the charge yesterday after selling bitcoin to two undercover agents on five occasions between February 2015 and July 2016. Prosecutors argued that he failed to obtain approval from both the Financial Crimes Enforcement Network (FinCEN) as well as the Missouri government to operate a money transmission business.

All told, Klein sold roughly 98 bitcoins to the agents, according to court documents, accruing about $30,000 over that period and charging commission on top of those sales. An unnamed second individual took part in two of those transactions, the documents state, but the identity of that person was not included in the record.

A LocalBitcoins account name identified in court documents shows that Klein has been selling bitcoins since at least 2013, with most of the publicly available feedback posted in that year. According to the site, he was last seen online eight months ago.

Klein is being represented by Mark Milton of St Louis-based law firm Husch Blackwell, along with Baker Marquart's Brian Klein (the two are not related), who said in a statement:

"Jason has accepted responsibility for his actions, and we intend to ask the Court to sentence him to probation (no prison time). We have no further comment at this time."

According to a copy of the plea agreement, Klein faces as many as five years in prison and $250,000 in fines. A sentencing date has not yet been set or publicly announced, the documents show.

Latest case

It's the newest federal case involving a seller of bitcoins based in the US in recent weeks, a development that has prompted observers to decry a larger trend.

Last week, Richard Petix of Rochester, New York, plead guilty to unlawful money transmission and lying to federal officials after he sold $13,000 worth of bitcoin to an undercover agent. And in late April, federal authorities raided the home of an Arizona bitcoin trader and advocate, who as of last week was being held pending trial.

While it's not immediately clear what factors are driving the recent spate of cases, observers like Carol Van Cleef, financial technology lead for Washington, DC-based law firm BakerHostetler, argue that the case underscores the gray areas in which bitcoin sellers operate in the US today – and the need for more clarification from FinCEN, which released guidance on the issue in 2014.

"I think it requires further explanation from policymakers as to where the lines are," she told CoinDesk.

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