Crypto exchange Poloniex settles case with US OFAC for this violation

• Poloniex agreed to pay over $7 million for violating sanctions law between January 2014 to November 2019
• The exchange had processed transactions worth over $15 million from users located in sanctioned regions

Crypto exchange – Poloniex – settled its case with the United States Department of Treasury’s Office of Foreign Assets Control (OFAC). The crypto exchange came under the regulatory authority’s scrutiny for violating its sanctions.

These sanctions were against countries like Syria, Sudan, Iran, Crimea, and Cuba. As a result, Poloniex will be paying over $7 million as a fine to the law enforcement department.

OFAC stated that the crypto exchange provided services to customers based in sanctioned regions. The incident took place between January 2014 to November 2019. The exchange’s services included trading, deposits, and withdrawals. In addition, the transaction activity coming from the sanctioned areas amounted to over $15 million.

A deep dive into the specifics 

According to the press release, the crypto exchange was open to all customers after its launch in January 2014. The sanctions compliance program came into force only in May 2015. However, only new customers were subjected to compliance checks, while it was business as usual for old customers who claimed to be from sanction-free jurisdiction.

Moreover, its IP address data checks began in May 2015, but an IP address block was implemented only in June 2017. And, sanctions control for users located in Crimea, Ukraine, was enforced from August 2017. The OFAC post further read,

“Poloniex conducted additional diligence on such logins, including contacting the owner of the relevant account, and closed certain accounts based on that diligence. Poloniex did not begin implementing a block on such IP addresses until June 2017.”

Notably, the enforcement authority stated that the compliance program strengthened after Circle – the USDC stablecoin issuer – acquired the crypto exchange. But, there were still a small number of accounts belonging to users in Crimea. Circle bought the exchange in February 2018 for $400 million. However, it was sold in October 2019, within 18 months of its acquisition.

The exchange was then rebranded to Polo Digital Assets, backed by an Asian investment group. After its resell, the crypto exchange exited the US market completely. Moreover, Justin Sun – the founder of Tron Foundation – was one of the investors in the group that acquired Poloniex. The case presented by the OFAC against Poloniex read,

“between approximately July 28, 2015 and September 2, 2019, Poloniex processed 65,942 online digital asset-related transactions with a combined value of approximately $15,335,349 for 232 customers apparently located in sanctioned jurisdictions, predominantly in Crimea, but also in Cuba, Iran, Sudan, and Syria.”

Not the only legal woes for Poloniex in the US

The OFAC is not the only regulatory authority that had taken action against the crypto exchange. Poloniex was also up against the US Securities and Exchanges Commission (SEC). The commission claimed that the crypto exchange offered the sale of unregistered securities on its platform.

This resulted in Poloniex paying over $10 million in fines to the commission in order to settle the case outside court. Moreover, it was Circle that ended up paying for this legal cost, adding to its realized loss of $156 million on the exchange.