Police arrested a Colorado Springs man this week suspected of laundering more than $240,000 for overseas scammers, an arrest affidavit showed.
Police say a ring of scammers worked with 61-year-old Charles Klinker to launder money obtained from elderly victims around the country. Police say the scammers used social media sites including Facebook to pose as the victims’ friends. Scammers told the victims they were eligible for $500,000 worth of government grant money for senior citizens if they paid, as much as $30,000, police said.
The scam, called advance-fee fraud, is an old one that has been used for decades by offshore crooks, commonly in Africa to bilk Americans out of cash. In the fraud, the scammers claim the victim has a pile for cash waiting from a lottery prize inheritance or grant, but it will only be sent if they first cover processing fees and taxes.
In this scam, police say Klinker was a middle man. Victims sent cash to Klinker who then converted the money to Bitcoin at ATM machines around Colorado Springs over a period of four months, the affidavit said.
Joseph Gersch, a professor of computer science at Colorado State University said bitcoin is an easy, reliable way to send money overseas at a low cost. But Gersch advised not to send money using Bitcoin or any other medium without knowing the receiver.
“There’s two sides to every Bitcoin, it can be used or abused,” Gersch said.
In court papers, officers say Klinker told detectives he started to get involved with “foreign currency exchange” because his online girlfriend “Teresa O’Brien” convinced him it would be a “good idea.” Klinker told police he had made a profit of $500 during his involvement with his overseas girlfriend, the affidavit said.
“We do consider Mr. Klinker a victim of this scam,” said Robert Odle, Klinker’s defense attorney.
After receiving a complaint from an elderly out-of state victim, an officer contacted Klinker in late November and told him he obtained the money illegally as part of a scam and needed to stop, the affidavit said. But Klinker continued to perpetuate the scam and laundered another $54,290 after police initially confronted him, the affidavit said.
Klinker is expected to face felony charges of money laundering and theft, according to the affidavit. His next court date is scheduled for May 20 at 10 a.m. where he will be advised of his rights, Odle said.
Klinker was freed on bond pending the outcome of the case.