In a recent development, the US Department of Treasury has announced that digital asset exchange Poloniex has agreed to a $7.6 million settlement over allegations of 66,000 sanction violations. The Office of Foreign Asset Control (OFAC) held the company responsible for facilitating trades worth over $15 million between January 2014 and November 2019 in sanctioned territories.
BREAKING:
— whalechart (@WhaleChart) May 3, 2023
US fines Bitcoin and crypto exchange Poloniex $7.6 million for violating sanctions
Restricted Territories and Poloniex’s Involvement
Users from countries such as Sudan, Syria, Crimea, Cuba, and Iran were able to access and trade on Poloniex, despite existing sanctions. The company introduced Know Your Customer (KYC) checks and due diligence measures in May 2015, but the allegations state that users from these regions could still use the platform. Furthermore, OFAC asserts that even after Circle Internet Financial Limited acquired Poloniex in early 2018, a small number of users from sanctioned territories could access the exchange.
OFAC’s Investigation Leads to Leniency
Initially, Poloniex could have faced a staggering $99 million fine for these violations. However, OFAC chose to impose a significantly lower penalty of $7.6 million. The decision took into account Poloniex’s small startup status during most of the violation period, the absence of a criminal history, the implementation of stronger KYC measures post-Circle acquisition, and the cooperation exhibited by both companies with OFAC.
Ownership Changes and Poloniex’s Current Direction
At present, a group of investors led by Justin Sun, the controversial creator of TRON, owns Poloniex. The exchange has rebranded itself as Polo Digital Assets and now aims to cater to global markets instead of focusing exclusively on the United States.
Ripple Effects for Binance and Other Crypto Exchanges
Poloniex’s crackdown serves as a stern warning for other digital asset exchanges, particularly Binance, which has also been accused of serving users from sanctioned countries like Iran. Although Binance announced plans to block Iranian users, it continued to provide access to its platform for users with an email address. This case underscores the likelihood of regulators catching up with Binance and other exchanges that fail to adhere to compliance measures and sanctions.
The Importance of Compliance in the Crypto Space
In summary, Poloniex’s multi-million dollar settlement underscores the critical role of compliance for digital asset exchanges. As regulatory scrutiny intensifies, it is imperative for crypto exchanges to adhere strictly to KYC processes and sanctioned territory restrictions to avoid hefty penalties and safeguard their reputation within the industry.
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