New court documents stemming from Tuesday’s sentencing of a Florida man revealed more than $60 million in ACH transactions was processed through a small New Jersey credit union that was commandeered to operate an illegal Bitcoin operation.
Anthony Murgio of Tampa, the creator and operator of Coin.mx, an unlicensed online Bitcoin exchange that defrauded financial institutions for years to process illegal transactions, was sentenced to five and a half years in prison by U.S. District Court Judge Alison J. Nathan in New York City.
Federal prosecutors asked Judge Nathan to impose a 10 to 12 year prison sentence given Murgio’s blatant criminal conduct. What’s more, the NCUA also asked the federal judge in a letter to give Murgio the “maximum sentence allowed under the federal sentencing guidelines.”
In January, Murgio pleaded guilty to conspiring to operate an unlicensed money transmitting business, conspiring to commit wire fraud and bank fraud, and conspiring to obstruct an NCUA examination.
Before taking over the $626,529 Helping Other People Excel Federal Credit Union in Jackson, N.J., Murgio and his coconspirators concealed the Bitcoin exchange by operating through phony front companies and websites such as private collectible clubs. They used these fake entities to trick financial institutions and credit card companies into believing their Bitcoin exchange was a members-only association who bought and sold collectable items.
In early 2014, because of increasing scrutiny and difficulty Coin.mx was having in using traditional bank and credit card accounts to process Bitcoin transactions, Murgio and others commandeered the credit union by making more than $150,000 in bribes to its board chair Trevon Hope, a pastor of a local church. Gross gave Murgio and his co-conspirators operational and board control of the credit union, including access to the credit union’s office and computer system.
Gross allowed Kapcharge —- a Canadian payments processing company with which Murgio was affiliated and which processed ACH transactions for Coin.mx — to open a business account at the credit union even though Kapcharge did not qualify for membership. The payments company used this account to process more than $60 million ACH transactions for Coin.mx and payday lending companies, according to federal prosecutors.
Murgio, Gross and other co-conspirators knew that the NCUA would scrutinize the net worth ratio of Helping Other People Excel FCU because it was becoming severely undercapitalized from the high volume of ACH transactions processed through the credit union. To conceal this issue from examiners, Murgio moved a significant amount of funds out of Kapcharge’s account at the end of the month so that the credit union’s assets would appear lower than the true number, which allowed the credit union to falsely report to the NCUA that the credit union was adequately capitalized, according to court documents.
In addition to manipulating the credit union’s books and documents, Murgio and others repeatedly lied to NCUA examiners to prevent them from discovering the corrupt arrangements to keep the credit union under Murgio’s control, prosecutors said.
However, the federal agency later ordered the credit union to stop making the ACH transactions and remove board members that were working with Murgio.
When the illegal activity was terminated, the remaining core of the credit union was unable to sustain existing built-up operations, which led to its insolvency in 2015, according to the NCUA.
“Had the illegal operations not taken place, the credit union would not have expended its equity to support those operations and could have survived,” the NCUA wrote in its letter to Judge Nathan.
The credit union’s liquidation led to a loss of more than $200,000, the NCUA said.
