Kraken exchange is suspected of violating US sanctions

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2022-07-29 07:45:39

The largest cryptocurrency company in the US – Kraken is accused of allowing Iranian users to buy and sell tokens and cryptocurrencies. This behavior is said to have violated the sanctions imposed by the host country government previously.

Kraken violated US sanctions by providing services to Iran

Kraken Faces Coercive Action from OFAC

The US Treasury Department’s Office of Foreign Assets Control (OFAC) is currently investigating the Kraken cryptocurrency exchange. According to the source initially received, there are many allegations that Kraken exchange allows users in Iran to buy and sell tokens and cryptocurrencies, in violation of US sanctions.

While the US has implemented economic sanctions on Iran since 1979, banning the export of goods or services to its people or businesses and organizations.

OFAC has been observing Kraken since 2019 and the number of Kraken users living in Iran is more than 1,500. Therefore, it is sooner or later to fine Kraken.

Kraken’s legal director, Marco Santori, said:

“Kraken has not yet commented on negotiations with regulators. Kraken has adhered to strict regulations and developed the team in line with the growth of the enterprise business. Kraken complies with sanctions as a matter of general and is always ready to report to the regulator when there is a problem.”

November 2019, a former employee of Kraken – Nathan Peter Runyon filed a lawsuit against the company for conducting business tactics despite, “…unethical and illegal, misleading employees about stock options and violating sanctions.” The case has now been settled.

It seems that the signs of “irrational” before Kraken CEO – Jesse Powell have long been revealed. Remember in March, Powell refused the request of the Deputy Prime Minister of Ukraine to stop serving Russian customers.

In an internal conversation in 2019, the CEO said that there is a possibility that he will break the law in case the company receives more benefits than the penalty. Powell also said Kraken is dealing with internal conflicts on issues including race and gender.

Jesse Powell and the view that
Jesse Powell and the view that “trade is borderless”

The US tightens the circle of control

In the context of the growing cryptocurrency market, the federal government is taking even more “aggressive” actions against companies in the industry.

In 2021, Tether, the company behind the leading stablecoin USDT, was fined by the Commodity Futures Trading Commission for misrepresenting its reserve assets. Most recently, Ishan Wahi, a former Coinbase employee – who is currently in hiding because of “delivery” for relatives – continues to be subjected to civil charges by the US Securities and Exchange Commission (SEC).

In recent months, government control has become increasingly tight due to the market downturn, when 3AC, Voyager and Celsius Network collapsed one after another.

Last year, Kraken was also fined $1.25 million from the CFTC.

US considers cryptocurrencies a threat?

US considers cryptocurrencies a threat?
US considers cryptocurrencies a threat?

Sanctions are one of the most powerful tools the United States uses to negatively affect countries that are not allies of the United States. Therefore, the “growth” of cryptocurrencies is a potential threat when it is not in the traditional banking system and can help many countries “outside” control.

In October, the Treasury Department warned that cryptocurrencies “have the potential to effectively relieve US sanctions.” The agency has released a 30-page compliance guidance report that recommends crypto companies use geofencing tools to control user locations.

“Since cryptocurrencies can be traded without going through banks or intermediaries, exchanges are responsible for financial compliance,” said Hailey Lennon, attorney at Anderson Kill, who handles the transactions. regulatory issues in cryptocurrencies, said.

In 2020, OFAC fined BitGo, a digital wallet service with offices in Palo Alto, California, more than $98,000 in 2020 for 183 sanctions violations. Last year, it fined BitPay, an Atlanta-based crypto payment processor, more than $500,000 for committing 2,102 sanctions.

In addition, according to Coinbase, in its financial report for 2021, they have submitted to OFAC transactions that may have violated sanctions, but the agency has not taken any action.

Kraken’s reaction now

Powell co-founded Kraken in 2011 and is one of the proponents of using Bitcoin, a digital currency that is said to be free from any government influence or regulation.

In 2018, the New York State Attorney General’s Office asked Kraken and 12 other exchanges to answer a questionnaire about the company’s financial performance. Kraken declined to respond, and CEO Powell called New York “an enemy of business” on Twitter.

This year, Powell was one of the biggest influencers in the crypto industry when he spoke out against the order to close accounts in Russia since the conflict between Russia and Ukraine broke out. The US government has imposed sanctions on a number of individuals and businesses in Russia, but it has not asked crypto companies to completely shut down access to the country.

In addition, according to a spreadsheet that Powell posted to Slack to help the company know the location of customers, Kraken is currently “green light” for accounts in sanctioned countries, and Iran is an example. He said the data came from residency information listed on “verified accounts”.

As detailed in the report, Kraken has 1,522 users residing in Iran, 149 in Syria and 83 in Cuba. The company also has over 2.5 million users residing in the US and over 500,000 in the UK.

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