Kraken, one of the world’s largest cryptocurrency exchanges, is under federal investigation and violates U.S. sanctions by allowing users in Iran and other regions to buy and sell digital tokens. There is a suspicion that there is.
The Treasury Department’s Office of Foreign Assets Control has been investigating the Kraken since 2019 and is expected to impose fines, people who did not reveal their identities for fear of retaliation from the company said. Kraken is the largest cryptocurrency company in the United States, facing enforcement measures from the OFAC sanctions imposed by the United States on Iran in 1979, banning the export of goods or services to people or groups within the country.
The federal government is cracking down on loosely regulated crypto companies as the digital currency market grows.Stablecoin company tether fine While the Justice Department filed an insider trading charge against a former employee of Coinbase, the largest cryptocurrency exchange in the United States, last year, the US Commodity Futures Trading Commission misrepresented its reserves. ..
Industry scrutiny has increased in recent months as the crypto market collapsed and several companies such as Voyager Digital and Celsius Network collapsed.
Kraken, a $ 11 billion worth of private company that allows users to buy, sell, or own a variety of cryptocurrencies, was previously faced with regulatory measures.Last year, the CFTC collected $ 1.25 million penalty Against the company for prohibited trading services.
In an internal conversation about employee benefits in 2019, Clayken CEO Jesse Powell said in a New York Times message that if the company’s benefits outweigh the potential penalties, there are many situations. Proposed to consider breaking the law. The company has also tackled internal disputes over issues such as race and gender inspired by Powell.
“We haven’t commented on specific discussions with regulatory agencies,” said Marco Suntory, Kraken’s Chief Legal Officer. “Kraken closely monitors sanctions compliance and, as a general matter, reports even potential issues to regulators,” he added.
A Treasury spokeswoman said the agency “will not confirm or comment on potential or ongoing investigations” and has promised to implement “sanctions to protect US national security.”
Sanctions are some of the most powerful tools needed to influence the behavior of countries that the United States does not consider to be allies. However, because digital coins do not flow through traditional banking systems, cryptocurrencies pose a threat of sanctions and make it difficult for governments to manage their funds.
In October, the Treasury warned that cryptocurrencies “may reduce the effectiveness of US sanctions.” Released 30 pages of compliance manual Recommended cryptocurrency companies use geolocation tools to eliminate customers in restricted areas.
“The fact that cryptocurrencies can be moved without banks or intermediaries means that exchanges are responsible for certain types of financial regulatory compliance,” said Anderson Kill’s lawyer, who deals with cryptocurrency regulatory issues. One Haley Lennon said.
The Kraken and sanctions issues surfaced in a November 2019 proceeding by Nathan Peter Lunyon, a former employee of the Treasury department who accused him of making money from accounts in sanctioned countries. According to legal documents, he said he brought the issue to Kraken’s Chief Financial Officer and Chief Compliance Officer in early 2019. (The proceedings were settled last year.)
That same year, OFAC began investigating Kraken with a focus on Iranian company accounts, people familiar with the investigation said. People said Kraken’s customers also opened accounts in two other countries under US sanctions, Syria and Cuba.
In 2020, OFAC fined BitGo, Digital wallet service with offices in Palo Alto, California. Over $ 98,000 in 2030 with 183 obvious sanctions violations.I was fined last year BitPay, Atlanta-based crypto payment processor, over $ 500,000 for 2,102 obvious violations. Coinbase also revealed in its 2021 financial statements that it had sent OFAC a notice to flag transactions that may have violated sanctions, but authorities have not taken any enforcement action.
Powell co-founded Kraken in 2011 and was an early supporter of Bitcoin, a digital currency that was sold without government influence or regulation.
In 2019, Powell discussed Slack about parental leave at Kraken, according to a message read by The Times. Powell said childcare leave because children “may be secondary work, distracting hobbies, or harmful addictions” and “something other than work that adversely affects work.” Said it was the responsibility of the company.
The conversation soon moved on to discuss legal requirements. Powell said in his “all formulas” it was important to consider whether “not complying with legal requirements is risky”. He added that “non-compliance with the law would be” unwise “by default, but it should always be considered as an option.”
Powell did not respond to the email requesting comment.
This year, Mr. Powell Loud voice In the crypto industry that resists calls to close Russian accounts after it invades Ukraine. The United States has sanctioned some individuals and businesses in Russia, but does not require crypto companies to completely block access to the country.
As of last month, Kraken appears to be servicing accounts in sanctioned countries such as Iran, showing where its customers are, according to a spreadsheet posted by Powell on a company-wide Slack channel. increase. He said the data was from the residence information listed in the “confirmed account”.
According to The Times, Kraken has 1,522 users in Iran, 149 in Syria and 83 in Cuba, according to a spreadsheet. The company also has more than 2.5 million users in the United States and more than 500,000 in the United Kingdom. Spreadsheets soon became unavailable to most employees.
