Crypto exchange Bittrex pays $29mn to settle US enforcement cases

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Cryp­to exchange Bit­trex has agreed to pay $29mn to set­tle enforce­ment cas­es with US author­i­ties for “appar­ent vio­la­tions” of sanc­tions against a host of coun­tries, includ­ing Iran, Cuba and Syria. 

The US Trea­sury said on Tues­day the case against the Wash­ing­ton-based com­pa­ny marked the first par­al­lel enforce­ment actions by Office of For­eign Assets Con­trol (Ofac) and the Finan­cial Crimes Enforce­ment Net­work (Fin­CEN) in the cryp­to industry.

The set­tle­ments extend the crack­down by finan­cial crime watch­dogs against alleged sanc­tions eva­sion tak­ing place in the cryp­to sphere.

Ear­li­er this year, the US also sanc­tioned two cryp­to mix­ing ser­vices, Blender.io and Tor­na­do Cash, both of which were alleged­ly used by North Korea-backed hack­ers. Ofac’s action against Bit­trex rep­re­sents the office’s largest enforce­ment action relat­ing to vir­tu­al currencies.

“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 US nation­al secu­ri­ty”, Ofac direc­tor Andrea Gac­ki said. 

Bit­trex agreed to remit over $24mn to Ofac in order to set­tle poten­tial civ­il lia­bil­i­ty for over 116,000 appar­ent vio­la­tions of mul­ti­ple sanc­tions pro­grams. The exchange’s sanc­tions com­pli­ance short­com­ings, the Trea­sury said, meant Bit­trex failed to pre­vent per­sons appar­ent­ly locat­ed in the Crimea region of Ukraine, Cuba, Iran, Sudan, and Syr­ia from using the platform. 

These per­sons alleged­ly engaged in $263mn worth of vir­tu­al cur­ren­cy relat­ed trans­ac­tions between March 2014 and Decem­ber 2017. The Trea­sury said Bit­trex had rea­son to know the where­abouts of these indi­vid­u­als based on IP address infor­ma­tion and phys­i­cal address infor­ma­tion col­lect­ed at the cus­tomer onboard­ing stage.

Ofac also deter­mined the exchange “con­veyed eco­nom­ic ben­e­fit to thou­sands of per­sons in sev­er­al juris­dic­tions sub­ject to Ofac sanc­tions and there­by harmed the integri­ty of mul­ti­ple Ofac sanc­tions programs”. 

“Vir­tu­al cur­ren­cy exchanges oper­at­ing world­wide should under­stand both who — and where — their cus­tomers are,” Gac­ki added.

The exchange also agreed to set­tle with Fin­CEN for more than $29mn for “will­ful vio­la­tions” of the Bank Secre­cy Act’s anti-mon­ey laun­der­ing pro­gramme and sus­pi­cious activ­i­ty report­ing require­ments. How­ev­er, Fin­CEN cred­it­ed Bittrex’s $24mn pay­ment to Ofac as part of its own settlement.

Dur­ing the peri­od from Feb­ru­ary 2014 to Decem­ber 2018, FinCEN’s inves­ti­ga­tion con­clud­ed Bit­trex “failed to main­tain an effec­tive anti-mon­ey laun­der­ing pro­gramme”. The exchange did not file any sus­pi­cious activ­i­ty report between Feb­ru­ary 2014 and May 2017 and failed to file reports on a “sig­nif­i­cant num­ber” of trans­ac­tions that involved sanc­tioned jurisdictions. 

“For years, Bittrex’s anti-mon­ey laun­der­ing and sus­pi­cious activ­i­ty report­ing fail­ures unnec­es­sar­i­ly exposed the US finan­cial sys­tem to threat actors,” said Fin­CEN act­ing direc­tor Hima­mauli Das, adding the company’s fail­ures cre­at­ed expo­sure to “high-risk coun­ter­par­ties includ­ing sanc­tioned juris­dic­tions, dark­net mar­kets, and ran­somware attackers”. 

Bit­trex said the com­pa­ny has “strived to com­ply with all gov­ern­ment require­ments dili­gent­ly and in good faith,” adding “we are proud of our stead­fast com­mit­ment to robust com­pli­ance, and the strong com­pli­ance mea­sures that we have in place today”. 

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