Poloniex Fined $7.6M for Sanctions Violations – Implications for Crypto Trading?

In the Brief:

  • Poloniex to pay $7.6M settlement
  • Over 65,000 apparent US sanctions violations
  • Users not screened between Jan 2014 and May 2015
  • Violations not voluntarily self-disclosed
  • Circle improved compliance measures
  • Poloniex sold to group of investors in 2019
  • Kraken agreed to $362K settlement with OFAC in Nov 2022

2 - 4 minute read

The United States Treasury Department’s Office of Foreign Asset Control recently announced that cryptocurrency exchange Poloniex has agreed to a $7.6 million settlement for multiple apparent violations of U.S. sanctions against Crimea, Cuba, Iran, Sudan, and Syria. According to the government department, Poloniex allowed users in the sanctioned jurisdictions to conduct more than $15 million worth of digital asset trades, deposits, and withdrawals between January 2014 and November 2019.

The violations occurred because Poloniex did not retroactively screen users who had registered at the exchange between when it launched in January 2014 and once it established a sanctions compliance program in May 2015. It is noteworthy that Poloniex’s violations were not “voluntarily self-disclosed” nor “egregious,” according to OFAC.

“Although Poloniex made efforts to identify and restrict accounts with a nexus to Iran, Cuba, Sudan, Crimea, and Syria pursuant to its compliance program, certain customers apparently located in these jurisdictions continued to use Poloniex’s platform to engage in online digital asset-related transactions,” said the notice.

“Poloniex and Circle provided substantial cooperation in connection with OFAC’s investigation into the Apparent Violations.”

Stablecoin issuer Circle acquired Poloniex in 2018, after which time OFAC’s investigation concluded the firm’s compliance measures “further improved,” specifically by closing accounts with IP addresses operating in Crimea. A group of investors, which included Tron founder Justin Sun, purchased the firm from Circle in 2019.

Poloniex is not the first cryptocurrency exchange to face sanctions from OFAC. In November 2022, crypto exchange Kraken agreed to a $362,000 settlement related to similar apparent sanctions violations in Iran.

The Bottom Line

The Poloniex settlement serves as a reminder of the importance of compliance with U.S. sanctions. The implications of such settlements for the cryptocurrency market are significant. It highlights the need for greater awareness and compliance with regulatory requirements. The settlements also indicate that cryptocurrency exchanges are not immune to the same scrutiny and penalties as traditional financial institutions. Such settlements could lead to increased regulatory pressure and scrutiny on the cryptocurrency market, which could impact asset prices.

Disclaimer: The content in this article is provided for informational purposes only and should not be considered as financial or trading advice. We are not financial advisors, and trading carries high risk. Always consult a professional financial advisor before making any investment decisions.

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