Kraken Under Investigation for Sanctions Violation: Report

Kraken – a popular US cryptocurrency exchange – is reportedly being investigated by the Treasury Department for allegedly servicing sanctioned Iranian users. The department is expected to levy a fine against the exchange. 

Would Kraken Break the Law?

As reported by the New York Times, the investigation was revealed by five people affiliated with Kraken. Each individual chose to remain anonymous over the fear of company retaliation. 

The investigation has allegedly been ongoing since 2019. If true, it would make Kraken the largest crypto company to face O.F.A.C. enforcement action for sanctions violations pertaining to Iran. Such trade restrictions were implemented in 1979, banning the export of any good or service to the country from the United States.

When asked, a Treasury spokeswoman said the agency does not comment on potential or ongoing investigations. Similarly, Kraken’s Chief Legal Officer Marco Santori said the firm “does not comment on specific discussions with regulators.” 

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

The report claims that CEO Jesse Powell shared messages in 2019 suggesting that his firm might break the law if the benefits to the company outweighed the costs of doing so. 

Powell has always been vocal about his libertarian values. In March, he rejected the Ukrainian Vice Prime Minister’s request to voluntarily stop servicing Russian customers. In the same Twitter thread, he said his company’s mission was to bridge people worldwide into crypto, “where arbitrary lines on maps no longer matter.”

On the other hand, Powell reluctantly bowed to Canadian authorities when requested to enforce sanctions against the Freedom Convoy protestors in February. In fact, he faced a separate investigation for promoting self-custodial wallets to users at the time, warning that he’d have to freeze their funds if forced by the government.

Crypto VS Sanctions

Between Canadian and Russian events, regulators worldwide have quickly grown leery of the crypto industry’s potential role in fostering sanctions evasion. 

In April, the International Monetary Fund warned that even Bitcoin miners could be used by Russia to evade sanctions. Indeed, President Putin has personally shown interest in Bitcoin mining for the advantages Russia could hold in the industry. 

However, Binance CEO Changpeng Zhao denies that cryptocurrencies are a good tool for bypassing trade restrictions. 

“If you look at the data, nobody smart does that,” he said during an April interview. “Crypto is too traceable, the governments around the world are increasingly very good at tracking crypto transactions.”