Key Takeaways:
- Crypto exchange Kraken violated US Sanctions on Iran
- According to the US Department of Treasury, the exchange also provided services to users in Syria and Cuba
- Kraken CEO Jesse Powell was vocal against sanctioning Russian users following the invasion of Ukraine
YEREVAN (CoinChapter.com) — The United States Department of Treasury is investigating cryptocurrency exchange Kraken for violating U.S sanctions on Iran, Syria, and Cuba.
The exchange allegedly allowed users in the said countries to buy and sell digital assets, the New York Times reports.
Notably, the Office of Foreign Assets Control has kept Kraken under the scanner since at least 2019. That same year, former Kraken employee Nathan Peter Runyon sued Kraken for illegal termination. He further alleged that the company had indulged in fraud and illegal practices.
While the exchange is alleged to have disregarded sanctions in other jurisdictions, the Treasury Department primarily focuses on Iranian users.
The United States has imposed various sanctions on the country since 1979. Under these, US-based companies and individuals are prohibited from doing business with any entity in Iran.
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If found guilty, Kraken will be the biggest crypto exchange to face the wrath of the authorities for sanctions violations. As a result, the U.S. Treasury Department’s Office of Foreign Assets Control may impose a fine.
Did Kraken break the rules willfully?
According to the detailed report, the cryptocurrency exchange may have violated the sanctions intentionally. As alleged by NYT, which saw internal messages from 2019, the company’s leadership was not fond of rules.
Kraken CEO Jesse Powell is alleged to have told colleagues that he would consider breaking the law if the benefits to the company outweigh the potential penalties.
While it is unclear if he also meant sanctions, his stance has brought him into conflict with the authorities.
Last month, the Kraken CEO allegedly shared a spreadsheet of its customer base with employees on Slack. It allegedly revealed that the exchange had 1,522 verified users with residences in Iran, 149 in Syria, and 83 in Cuba.
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U.S-based, according to the spreadsheet, were over 2.5 million. In contrast, the exchange has more than 500,000 users in Britain.
Meanwhile, Kraken chose not to elaborate on the matter.
“Kraken does not comment on specific discussions with regulators. Kraken has robust compliance measures in place and continues to grow its compliance team to match its business growth. Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues,”
Marco Santori, chief legal officer of cryptocurrency exchange Kraken said.
Kraken criticized sanctions on Russian users
Critics have always looked at cryptocurrencies with suspicion. But, from money laundering to trade on the dark web, digital assets have become targets of those seeking to ban them.
In October 2021, US the Treasury Department released a long compliance manual to help crypto companies function within the purview of the law. However, it also expressed concerns that cryptocurrencies could undermine the US Sanctions in various parts of the world.
Earlier this year, following the invasion of Ukraine, Kraken refused to sanction Russian accounts unless required by law. Instead, he sympathized with the Ukrainians and said the practice would go against their policy.
“If we were going to voluntarily freeze financial accounts of residents of countries unjustly attacking and provoking violence around the world, step 1 would be to freeze all US accounts. As a practical matter, that’s not really a viable business option for us,”
Powell had argued.
Earlier this year, Indian Finance Minister Nirmala Sitharaman expressed concerns that global terror groups will use digital assets to fund their activities.
Another cryptocurrency exchange, Coinbase, has also come under the U.S. Securities and Exchange Commission (SEC) scanner. The securities watchdog suspects the company allowed U.S. citizens to trade in unregistered securities.
