- Kraken is currently under US investigation over suspected sanction violations.
- The OFAC accused the exchange of serving users in Iran, Cuba, and Syria.
- The exchange was accused of the same offense in 2019 by a former employee.
Kraken has become the biggest cryptocurrency exchange in the United States to face enforcement action from the Treasury Department’s Office of Foreign Assets Control (OFAC).
Kraken allegedly served users from Iran, Cuba, Syria
The exchange is currently under federal investigation over a suspected violation of the US sanction rule. The exchange is accused of allowing customers from regions sanctioned by the US authorities to trade cryptocurrencies, the New York Times reported Wednesday, citing people familiar with the matter.
According to the information provided, the US Treasury Department’s Office of Foreign Assets Control (OFAC) alleged that Kraken had opened accounts for users in Iran, Syria, Cuba, and two other regions sanctioned by the US government. The agency is expected to impose a fine on the exchange if convicted of the offense.
“Kraken closely monitors compliance with sanctions laws and, as a general matter, reports to regulators even potential issues.” Marco Santori, Kraken’s chief legal officer
OFAC initially launched their investigation on this matter in 2019, following a lawsuit filed against Kraken by a former employee, Nathan Peter Runyon, that same year. In the suit, the exchange was accused by Runyon, who worked at the finance department, of generating revenue from accounts opened in countries prohibited under the US sanction law.
Crypto and US sanctions
Given the inherent properties of digital currencies, the US government views that they can “potentially reduce the efficacy of American sanctions.” Hence, several crypto companies in the country are subjected to intense scrutiny by the regulators to ensure that cryptocurrencies are not used to evade sanctions.
Following the Russia-Ukraine conflict earlier this year, the US government had directed cryptocurrency exchanges to prohibit Russian users from accessing crypto services on their platform due to the sanctions levied on the nation.