We do the research, you get the alpha!
Crypto exchange Poloniex has agreed to pay $7.59 million to settle allegations that it allowed violations of international sanctions on its platform, the U.S. Treasury Department said in a statement.
Between January 2014 and November 2019, the trading platform allowed customers who appeared to be located in sanctioned jurisdictions to make transactions.
The value of these transactions amounted to around $15.3 million for 232 customers who were mainly in the Crimea region of Ukraine, but also in Cuba, Iran, Sudan, and Syria.
The Treasury’s Office of Foreign Assets Control (OFAC), which enforces economic sanctions, said Poloniex had reason to know the locations of the accounts in question based on both Know Your Customer (KYC) information and IP addresses.
OFAC noted that controls introduced by late 2017 substantially reduced the rate of the alleged violations, as did additional compliance measures introduced when Poloniex was acquired by Circle in February 2018. However, some apparent violations continued in 2018 and 2019, related to a small number of accounts in Crimea.
“This action highlights that online digital asset companies – like all financial service providers – are responsible for ensuring that they do not engage in transactions prohibited by OFAC sanctions, such as providing services to persons in comprehensively sanctioned jurisdictions,” a statement from OFAC said.
“To mitigate such risks, online digital asset companies should develop a tailored, risk-based sanctions compliance program.”
Regulatory fallout for ‘legacy’ business
In November 2019, the Poloniex platform was spun out by Circle as Polo Digital Assets and sold to an unnamed Asian investment firm. That deal did not include Poloniex’s U.S. arm, which Circle then wound down. The Treasury said Poloniex now has no business operations and no employees.
A Circle spokesman told the Wall Street Journal that the company had “agreed to assume certain potential regulatory liabilities associated with the acquisition of Poloniex”.
“We are pleased to put this legacy issue behind us,” they added. Decrypt has reached out to Circle and will update this article should we receive a response.
The agreement follows a previous settlement in August 2021, when Poloniex agreed to pay $10.4 million to the Securities and Exchange Commission (SEC) to settle charges of operating as an unlicensed cryptocurrency exchange.
The mothballed business is not the only crypto exchange to have faced scrutiny relating to its sanctions compliance. Last year, working with the Financial Crimes Enforcement Network (FinCEN), OFAC fined Bittrex $53 million for facilitating a similar list of apparent sanctions violations.