The US government is reportedly investigating Kraken, a massive cryptocurrency exchange suspected of violating sanctions against Iran, and is expected to slap the crypto behemoth with a fine in the near future.
The Treasury Department’s Office of Foreign Assets Control has been probing the US crypto exchange since 2019, according to the New York Times, which broke the story on Tuesday.
“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,” The Register was told by Uncle Sam.
US sanctions against Iran prohibit any exports to the Mid-East nation. Allowing users in Iran to buy and sell tokens would put Kraken in violation of the sanctions, which has drawn the attention of federal investigators, the Times reported, citing five people affiliated with the company or with knowledge of the inquiry.
If the rumors are true, Kraken would be the largest US crypto firm to face an Office of Foreign Assets Control enforcement action related to sanctions against Iran, we’re told.
Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues
Kraken, for its part, is keeping mum. The crypto exchange declined to answer The Register‘s specific questions about the reported investigation and pending fine. Instead, Kraken’s Chief Legal Officer Marco Santori emailed a statement.
“Kraken does not comment on specific discussions with regulators,” Santori said.
“Kraken has robust compliance measures in place and continues to grow its compliance team to match its business growth. Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues.”
Kraken’s reported federal probe follows a series of US enforcement actions against crypto companies and their executives as law enforcement — and juries — increasingly crack down on criminals using crypto business to scam victims out of millions of dollars, launder money and engage in other nefarious activities.
Last week the Feds announced criminal charges against former Coinbase manager Ishan Wahi, plus his brother and a pal, in what could be the first-ever cryptocurrency insider-trading scheme in America. This action followed the first-ever insider trading prosecution involving NFTs last month.
And speaking of Coinbase: it is, Bloomberg reports, facing an SEC probe for allowing netizens to buy and sell cryptocurrencies that should have been, in the watchdog’s view, registered as securities by Coinbase but weren’t.
Coinbase has insisted the tokens it trades are not securities, which have special registration requirements. The SEC begs to differ, and says at least some of the altcoins it offers are securities and should have been properly registered.
What’s more, it’s reported, the SEC said some of the coins in the Wahi case are examples of digital tokens that should have been registered by Coinbase as securities.
“I’m happy to say it again and again: we are confident that our rigorous diligence process — a process the SEC has already reviewed — keeps securities off our platform, and we look forward to engaging with the SEC on the matter,” Coinbase’s Chief Legal Officer Paul Grewal tweeted today in response.
Also last week, a crook who created a business called My Big Coin to cheat victims out of more than $6 million was found guilty by a jury.
And on Friday, the CEO and founder of Titanium Blockchain Infrastructure Services pleaded guilty of his role in a cryptocurrency fraud scheme involving Titanium’s initial coin offering (ICO) that harvested $21 million from victims who thought they were investing in a legit token.
According to court documents [PDF], 54-year-old Michael Alan Stollery, of Reseda, California, lured folks into purchasing his company’s pointless digital coin called BARs with a series of lies — including boasting Apple, IBM, Intel, HPE, Honewell, Microsoft, General Electric, Boeing and Walt Disney, among other well-known brands, were also customers.
Stollery also broke the law when he failed to register the ICO with the US Securities and Exchange Commission, according to the Feds. His crypto-coin was basically worthless and useless, so marks were simply just shoveling him money to spend.
The CEO copped to falsifying parts of Titanium Blockchain’s white papers, including those related to his company’s profitability, and admitted to using people’s cash for expenses unrelated to his company — such as credit card payments and his Hawaiian condo’s bills.
Stollery pleaded guilty to one count of securities fraud, and is scheduled to be sentenced on November 18. He faces up to 20 years in prison. ®