Crypto trader goes to jail for OTC trading

Mark Alexander Hopkins, also known as “Doctor Bitcoin” or by his Twitter name Rizzn, has said he has to serve up to 15 months in a federal prison in the United States. The reason: He ran a business where he exchanged US dollars for Bitcoin for his customers “Over the Counter” (OTC). He tweeted this to his followers on the way to prison.

The absurdity of this is that its crypto service is actually registered with FinCen, the US financial crime regulator, and should therefore be legitimate.

in one Twitter thread Hopkins lays out his case and explains how he believes he became a victim of the American legal system and patchy crypto regulation.

At the wrong time, in the wrong market

Mark Hopkins ran a business as an Over the Counter (OTC) Bitcoin Trader. Say the over-the-counter crypto business from wallet to wallet. OTC trading in connection with crypto whales should be known to many in the crypto space. For larger transactions, these often use individual traders instead of crypto exchanges, where they can exchange Bitcoin and fiat currencies. This avoids price fluctuations in the market. But: OTC trading is also used by criminals. Because of the rather lax “Know Your Customer” (KYC) procedure, they can trade crypto with cash supposedly anonymously.

So also in the case of Mark Hopkins. Not himself, but one of his clients allegedly traded stolen funds from a scam without his knowledge. However, the whole thing was exposed and investigators quickly landed at Hopkins, who they assumed was an accessory. On October 23, 2020, the FBI stormed the trader’s house and confiscated his technical devices such as cell phones and laptops.

Just a misunderstanding?

Since he said he had no way of knowing that he had done business with a scammer, Hopkins initially suspected a misunderstanding. He was said to be cooperative and answered the agents’ questions transparently in order to provide clarification. In his eyes, he hadn’t done anything wrong, which is why he expected a quick resignation.

That changed when he was called in for further questioning by the FBI. Allegedly, the authorities here said they could pin him and his wife as complicit in the fraud, which threatened both of them with up to 35 years in prison. To protect his wife, he consented in June 2021 to operating an unregistered crypto trading business and negligently assisting in a fraud confession to deliver. And that although, to the best of his knowledge, he was actually running a registered business.

Unclear regulation

Hopkins actually started his bitcoin trading business with FinCen, the government agency for the investigation and prevention of financial crimes, reported and allegedly even have it checked by a lawyer for conformity.

According to FinCen, however, as the operator of a money trading business in the USA, Hopkins would also have had to obtain a license at the state level in order to qualify for the implementation of KYC. The problem: According to the applicable law not awarded in his state of Texas for a simple crypto peer-2-peer deal. So he apparently fell victim to a loophole in the system. Hopkins even accused the Justice Department of deliberately leaving the legislation open in order to gain access to small traders like him.

For Hopkins, the whole thing is proof of the “state’s overarching war on privacy.” He also feels like a dealer “got caught with weed while the rest of the nation moves forward with legalization.” At the end of his thread, he called for the introduction of clear laws around blockchain.

In any case, it remains questionable whether anyone who comes into contact with funds from criminal activities on the blockchain can really be prosecuted. Ever since the Tornado Cash saga, the US has seemed to agree. According to the latest sanctions, however, the numerous addresses of celebrities who involuntarily received money from the mixing service should also have been prosecuted.