Kraken Faces Investigation for Letting Users in Iran Buy and Sell Crypto

Key Insights:

• The US Treasury is probing whether Kraken allowed users in Iran to trade cryptos.
• The exchange has been under investigation since 2019 and is likely to be fined, reports noted.
• Crypto payment platforms BitGo and BitPay faced hefty fines for apparent sanctions violations.

Crypto exchange Kraken (KRAK) would face a probe from the US Treasury for reportedly allowing users from sanctioned nations to trade cryptocurrencies.

According to a New York Times report, the Department of Treasury has suspected Kraken of violating US sanctions, a powerful tool in dealing with countries that defy US foreign policy interests.

The exchange has allegedly permitted users from Iran to buy and sell cryptos from its platform.

According to five unnamed persons familiar with the matter, the Treasury’s Office of Foreign Assets Control (OFAC) has been involved in probing the Kraken exchange since 2019. It is expected to slap the crypto behemoth with a hefty fine in the near future.

A spokesperson from the Treasury noted,

“The Treasury does not confirm or comment on potential or ongoing investigations. We remain committed to using all of our tools and authorities to enforce the sanctions that protect US national security.”

Per the US sanctions against Iran, exports to the mid-east nation are prohibited. If investigations find Kraken guilty, the exchange would be the largest US crypto firm to face an Office of Foreign Assets Control enforcement action related to sanctions against Iran.

Kraken has been mum when asked about the investigation and pending fine. In an email to the Times, Marco Santori, Kraken’s chief legal officer, said that the company does not comment on specific discussions with regulators. He added,

“Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues.”

Uncle Sam Cracks Down on Crypto Companies

The federal government has scrutinized several crypto firms as the market multiplies.

For instance, California-based crypto wallet service BitGo was booked for 183 apparent US sanctions violations and was fined more than $98,000 in 2020. This was followed by BitPay, which paid over $500,000 for 2,102 violations.

Jesse Powell, the co-founder of Kraken, shared a spreadsheet last month on a company Slack channel that showed where the company’s customers are located. The data noted 1,522 users with residences in Iran, 149 in Syria, and 83 in Cuba, all of which are sanctioned nations, the Times reported.

However, this isn’t the first time the $11 billion value Kraken has been under the lens of the Department of Treasury. In 2019, a former employee from the company’s finance department, Nathan Peter Runyon, accused the startup of generating revenue from accounts based in sanctioned nations. The lawsuit was settled last year.

The Treasury noted last year that cryptocurrencies like bitcoin (BTC), ether (ETH), and litecoin (LTC) “potentially reduce the efficacy of American sanctions.” The department suggested crypto firms in the US use geolocation tools to cut out customers from those nations.