Five people affiliated with the company or with knowledge of the inquiry say that the company is under federal investigation for violating U.S. sanctions by allowing users in Iran and elsewhere to buy and sell digital token.
The people, who did not want to be identified for fear of repercussions from the company, said that the Treasury Department's Office of Foreign Assets Control has been investigating the company for the past year. O.F.A.C. sanctions against Iran prohibit the export of goods or services to people or entities in the country.
As the market for digital currency has grown, the federal government has begun cracking down on lightly regulated companies. The Commodity Futures Trading Commission fined the stable coin company for misstatements last year, while the Justice Department brought charges against an ex-employee of the largest U.S.cryptocurrencies exchange.
Scrutiny of the industry has gone up in the last few months due to the collapse of several companies.
A private company valued at $11 billion that allows users to buy, sell or hold various cryptocurrencies has faced regulatory actions before. The company was fined $1.25 million by the C.F.T.C. last year.
According to messages seen by The New York Times, Jesse Powell suggested breaking the law in a wide range of situations if the advantages to the company were more than the penalties. The company has been dealing with internal conflict over issues like race and gender.
Santori said the company does not comment on specific discussions with regulators. Kraken closely monitors compliance with sanctions laws and reports any potential issues to regulators.
The agency does not confirm or comment on potential or ongoing investigations, and is committed to enforce sanctions that protect U.S. national security.
The United States has the power to influence the behavior of nations it doesn't consider allies with sanctions. Cryptocurrencies make it harder for the government to control them because they don't flow through the traditional banking system.
The Treasury Department said in October that cryptocurrencies could reduce the effectiveness of American sanctions. The manual recommended that the companies use tools to weed out customers in restricted areas.
Exchanges are responsible for certain types of financial regulatory compliance because they can move without a bank.
The start-up of generating revenue from accounts in sanctioned countries was accused in a lawsuit of generating revenue by a former employee. According to legal documents, he brought the matter to the CFO and top compliance official. Last year, the suit was resolved.
According to people familiar with the investigation, O.F.A.C. started looking at the company's accounts in Iran. People with knowledge of the matter said that customers have opened accounts in Cuba and Syria.
BitGo was fined $98,000 by the O.F.A.C. in 2020 for 183 apparent sanctions violations. BitPay was fined over half a million dollars last year for over two thousand apparent violations. The O.F.A.C hasn't taken any enforcement action despite the fact that Coinbase flagged transactions that may have violated sanctions.
Mr. Powell was one of the earliest proponents of the digital currency that was marketed as being free of government regulation.
The New York Attorney General wanted to know more about the operations of the exchanges. Mr. Powell called New York "hostile to business" on the social networking site.
Messages viewed by The Times show that Mr. Powell got into an argument about parental leave in 2019.
A discussion of legal requirements followed. It was important to consider whether it was worth the risk to not follow the legal requirement, according to Mr. Powell. It always has to be considered as an option if you don't follow the law.
Mr Powell did not reply to the email.
Mr. Powell resisted calls to shut down accounts in Russia after the invasion of Ukraine. The United States has imposed sanctions on individuals and businesses in Russia, but it hasn't required companies to stop doing business in the country.
According to a spreadsheet posted to a companywide Slack channel by Mr. Powell, the company appeared to still be servicing accounts in Iran. The data came from verified accounts.
There are 1,522 users with residences in Iran, 149 in Syria, and 83 in Cuba according to a spreadsheet. More than 2.5 million users lived in the US and 500,000 in Britain. Most employees couldn't access the spreadsheet.
All Rights Reserved © 2024
