This alleged violation was discovered through five people who were associated with the company or with the knowledge of the inquiry. This investigation is being carried out by United States Treasury’s Office of Foreign Assets Control.
Currently these investigations are underway and it is directed towards finding out if these sanctions-hit countries were permitted to buy and sell cryptocurrencies. The Treasury Department was planning on imposing a fine against the exchange but it has not suggested a timeline for the enforcement action.
The U.S Commodity Futures Trading Commission (CFTC) had pressed charges against the crypto exchange platform in the year 2021 by imposing a $1.25 million fine. Kraken is a private crypto exchange which is valued at $11 billion and has been co-founded by Chief Executive Jesse Powell in 2011.
The Treasury Department’s Office of Foreign Assets Control (OAFC) has been carrying out investigations on the company ever since 2019. This could also amount to a fine.
It would make Kraken one of the largest crypto company to witness enforcement related action to US sanctions which were imposed in 1979 that prohibited the export of goods and services to Iran.
Not just this, the Treasury is now examining if Kraken had carried out trade in accounts based in Syria, Cuba and Iran.
Kraken’s ex-employee had reported that supposedly the crypto exchange had been making money off users in the above mentioned countries.
Jesse Powell also supposedly posted a spreadsheet to a company Slack channel that disclosed Kraken has 1,522 accounts in Iran, 149 in Syria and 83 in Cuba as of the previous month.
This data allegedly was given out from residence information on “verified accounts”.
Kraken hasn’t agreed to comment further but it said that,
Closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues.
A Treasury spokesperson also mentioned that the agency was committed to enforcing, “sanctions that protect US national security,” however, nothing apart from this was divulged.
Scrutiny on crypto exchanges in the recent times have shot up. Many platforms have ensured to actively block Iranian users. For instance, NFT trading site OpenSea had blocked Iranian users in the earlier months of 2022.
The Treasury has also proactively fined crypto companies previously. BitGo, also an exchange faced fines. Along with that, BitPay, a transaction processor was also fined for alleged sanctions breach. Recently, Binance reportedly continued serving the Irian users by allowing trade to happen despite sanctions and a company ban from operating in Iran.
This scrutiny has increased owing to the recent crypto market downturn that has caused damages to these digital asset exchanges. Voyager Digital and Celsius Network have also failed to remain afloat in the market.