Kraken, a US cryptocurrency exchange, on Monday agreed to pay more than $360,000 to the Treasury Department to settle allegations of sanctions violations related to virtual currency transactions by users in Iran.
The Treasury Department’s Office of Foreign Assets Control said Kraken, the second-largest crypto exchange in the United States by volume, had agreed to a settlement for enabling nearly $1.7 million in transactions to individuals who appeared to be in Iran between October 2015 and June 2019. The United States imposed sanctions on Iran in 1979, prohibiting the export of goods or services to people or entities in the country.
In its statement, the office said the maximum civil fine for the violations could exceed $270 million, but determined that the settlement would be much less because Kraken had reported the possible violations. In addition, the company agreed to spend an additional $100,000 on new compliance checks.
“Kraken has not exercised due caution or ensured its sanctions compliance obligations,” the statement said. It added that the company had user data showing that “transactions appear to have been made from Iran”.
Kraken Chief Legal Officer Marco Santori said in a statement that the company was “happy to resolve this matter.”
“Even before entering into this resolution, Kraken had taken a series of steps to strengthen our compliance measures,” he said. “This includes further strengthening control systems, expanding our compliance team and improving training and accountability.”
The settlement comes at a tumultuous time for the crypto industry. This month, one of Kraken’s rivals, the Bahamas-based exchange FTX, collapsed after a run on deposits, sending the industry into one of the worst crises in its history. On Monday, another major crypto firm, the lender BlockFi, filed for bankruptcy, citing the impact of the FTX implosion.
Kraken, an $11 billion privately held company that allows users to buy, sell or hold various cryptocurrencies, faced previous regulatory action, including a $1.25 million fine from the Commodity Futures Trading Commission for providing a prohibited trading service. Jesse Powell, co-founder and CEO of the company, announced in September that he would step down following internal conflicts with employees and government investigations.
In July, The New York Times reported that the Office of Foreign Assets Control had been investigating Kraken since 2019. Last month, Mr. Powell created a spreadsheet on the messaging system Slack that revealed that Kraken had maintained accounts in sanctioned countries such as Iran. He said the data came from whereabouts information listed on “verified accounts”.
Last month, the Office of Foreign Assets Control announced its largest fine for sanctions violations by a crypto firm, fining cryptocurrency exchange Bittrex $24 million for allowing customers in Cuba, Iran, Sudan, Syria and the Russian Federation to occupied Crimea to conduct virtual currency transactions worth more than a reported $263 million.
