U.S. Treasury Accuses Bittrex of Violating Sanctions, Cryptocurrency Exchange Agrees to Sort Out With Regulator

On October 11, the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC) of the U.S. Treasury Department announced that charges against the cryptocurrency exchange Bittrex had been resolved. The cryptocurrency exchange was charged with breaking sanctions and failing to “implement effective sanctions compliance controls” between March 2014 and December 2017.

According to the U.S. Treasury department regulators, the violations were caused by transactions from “persons apparently located in the Crimea region of Ukraine, Cuba, Iran, Sudan, and Syria.” US officials said the total amount of cryptocurrency transactions violating American financial prohibitions totaled $263.45 million.

Andrea Gacki, director of OFAC, explained that the transactions could endanger the country as a whole if Virtual Asset Service Providers (VASPs) do not use robust sanctions compliance. “When virtual currency firms fail to implement effective sanctions compliance controls, including screening customers located in sanctioned jurisdictions, they can become a vehicle for illicit actors that threaten U.S. national security,” Gacki said on Tuesday.

FinCEN recently, in March of last year, raised concerns about the use of crypto assets for sanction evasion. The year before, FinCEN allegedly assessed $100 million in fines against the cryptocurrency derivatives exchange Bitmex for “willful violations of the Bank Secrecy Act.” Over the last several years, the U.S. Treasury Department’s OFAC has been active in banning crypto assets. Most recently, the regulator prohibited the ether mixing program Tornado Cash.

According to a New York Times (NYT) article from July 2022 that cited five persons with knowledge of the situation, OFAC was supposedly looking into the San Francisco-based cryptocurrency exchange Kraken. On December 30, 2020, Bitgo and OFAC reached a $98,830 settlement over sanctions infringements. According to an OFAC letter from February 18, 2022, Bitpay reached a settlement with the Treasury and agreed to “remit $507,375 to settle its potential civil liability.”

Bittrex has agreed to pay settlements with FinCEN and OFAC for the accusations and potential responsibility raised against the VASP for the transactions dating from 2014 to 2017. FinCEN will credit a portion of the funds as per the settlement agreement. FinCEN details that Bittrex’s AML program failed to detect threats between 2014 and 2017, and the business did not submit any suspicious activity reports (SARs) over those three years.

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