Kraken Under Investigation for Allegedly Violating US Sanctions

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Crypto Regulation
Kraken Under Investigation for Allegedly Violating US Sanctions

Cryptocurrency exchange giant Kraken has reportedly come under federal investigation by the Treasury Department’s Office of Foreign Assets Control (OFAC), on the suspicion that the exchange offered services to clients in Iran, violating US sanctions. 

Kraken Supposedly Served Iran Users

According to the New York Times on Tuesday (July 26, 2022), people familiar with the matter who wished to remain anonymous revealed that Kraken has been under federal investigation since 2019. The anonymous sources said that the company allowed users in Iran and other sanctions jurisdictions to trade digital assets. 

The insiders added that the Treasury Department could impose a fine on Kraken. Meanwhile, Kraken’s Chief Legal Officer Marco Santori, said that the firm “does not comment on specific discussions with regulators. 

Santori further said:

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

The report, meanwhile, noted that Kraken would be the largest U.S. crypto exchange to face enforcement action from the OFAC for violating sanctions against Iran, which were first imposed by the United States in 1979. 

While Kraken is allegedly serving Iran users, NFT marketplace behemoth OpenSea blocked Iranian customers from accessing its platform, causing anguish to users in the region. The company said:

OpenSea blocks users and territories on the U.S. sanctions list from using our services—including buying, selling, or transferring NFTs on OpenSea—and our Terms of Service explicitly prohibit sanctioned users or users in sanctioned territories from using our services.

This is not the first time, however, that Kraken has come under regulators’ radar. In September 2021, the Commodity Futures Trading Commission (CFTC) slammed the American cryptocurrency exchange with fines worth $1.25 million. 

Meanwhile, in March 2022, Kraken was among the few major exchanges which refused to ban Russian accounts, following the invasion of Ukraine by Russia. 

According to CEO Jesse Powell, such action was extreme and unfavorable to Russians against the invasion, adding that “shutting off someone’s financial access is something we take very seriously.”

U.S. Regulators Increase Scrutiny on Major Crypto Exchanges

The United States authorities continue to tighten their scrutiny on cryptocurrency exchanges. Tether, the issuer behind the world’s largest stablecoin by market capitalization, USDT, was fined a civil monetary penalty of $41 million by the CFTC, for false claims about USDT being fully backed by the US dollar. 

Another major crypto company that has come under several probes in the U.S., is Binance. In 2021, the Justice Department, and Internal Revenue Service (IRS) were investigating the firm. The CFTC also reportedly looked into Binance activities to determine if the exchange allowed American residents to make illegal trades. 

In June 2022, there were reports that the U.S. Securities and Exchange Commission (SEC) was probing Binance’s BNB token sale in 2017 to check if the altcoin was sold as an unregistered security. The regulator is also scrutinizing the exchange for possible insider trading. 

According to a recent report by crypto.news, the SEC is investigating Coinbase for supposedly allowing users to illegally trade digital tokens not yet registered as securities. The regulatory watchdog and the Department of Justice earlier accused a former Coinbase employee of insider trading. 

Anthonia Isichei

A graduate of English, She stumbled on cryptocurrency while trying to proofread an article for a friend back in 2011, and since then, She has been hooked! She loves to play word games and tennis.