The US Department of Justice (DOJ) has slapped cryptocurrency-friendly money transfer service Payza with a lawsuit for allegedly laundering more than $250 million connected to illicit activities including Ponzi schemes, pyramid schemes, and child pornography rings.
The lawsuit, which was filed on Nov. 3, 2016, but not released until this week, also accuses Payza and its co-founders — Canadian brothers Firoz Patel and Ferhan Patel — of operating an unlicensed money transmitter business.
The alleged criminal behavior began in March 2012 and saw the service and its co-conspirators knowingly launder more than $250 million for unlawful operations connected to a variety of criminal enterprises.
According to the statement, Ferhan Patel was arrested on March 18 in Detroit, while Firoz Patel remains at large.
“The arrest and indictments in this case demonstrate that we will vigorously enforce laws meant to protect the American consumer,” said U.S. Attorney Jessie K. Liu. “Money transmitting businesses are required to be registered federally and licensed in most states and jurisdictions, including the District of Columbia. Consumers should beware of those that do not follow these laws because they could be acting as a cover for other illegal activity.”
The indictment appears to be connected to an investigation that began as early as 2015. At the time, Payza told CCN that the DOJ was investigating another company — Obopay, one of its former partners — and that Payza was cooperating with the authorities. However, the indictment said that Payza and its co-conspirators were responsible for the criminal activities and that Obopay was not aware of them.
The indictment does not specifically state whether any of these illicit transactions involved cryptocurrency, but Payza has been helping customers buy and sell Bitcoin since 2014 and has signaled its intent to add support for a number of altcoins in the coming months. In fact, Payza announced in a March 19 press release — one day after Ferhan Patel had been arrested — that it would begin processing Dash payments.
At the time of writing, Payza’s website domain had been seized by the DOJ. However, the company’s social media accounts have begun directing customers to a new website with a .eu domain address.
In a statement posted on Twitter, Payza acknowledged that it is “currently dealing with some legal matters in the United States” but claimed that all funds were secure and accessible through the new website.
“As some of you may be aware of already, Payza is currently dealing with some legal matters in the United States. We cannot give any specific details at this time, but please be aware that this is an accusation and it is NOT evidence of guilt,” Payza said. “Right now, we are working on a solution to this, and the technical issues we are experiencing, and we do not want you to worry.”
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