Bittrex fined $53 million in the US

The US Treasury Department said Tuesday that cryptocurrency exchange Bittrex Inc has agreed to pay a $53 million fine for “apparent violations” of sanctions against certain countries and the Anti-Money Laundering Act.

US Treasury fines Bittrex $53 million

The battle between US regulatory institutions and cryptocurrency companies over their alleged regulatory violations on US soil continues. Two days ago, the US Treasury Department imposed fines totaling $53 million on the exchange Bittrex for violating money laundering regulations.

JUST IN: 🇺🇸 US Treasury fines #crypto exchange Bittrex $53 million for violating federal sanctions.

— Watcher.Guru (@WatcherGuru) October 11, 2022

Two separate bureaus employed by the Treasury Department reportedly sanctioned the US exchange with heavy fines for specific violations. The Treasury Department’s Office of Foreign Assets Control (OFAC) and Financial Crimes Enforcement Network (FinCEN) have imposed fines of approximately $24 million and $29 million on Bittrex, respectively.

Indeed, the fine would be smaller in amount because some of the penalties imposed by the two bureaus would relate to the same sanction, a FinCEN spokesperson said. The penalties would also relate to some violations committed concerning the rules on sanctions imposed on some countries. According to the indictment, Bittrex allowed some US companies, through the use of its platform, to do business with individuals operating in Iran, Sudan, Syria, Cuba, and the Crimea region of Ukraine, according to what the US watchdog agency disclosed on Tuesday.

Bittrex admits fault

Bittrex, headquartered in Bellevue, Washington, has reportedly agreed to pay the sanctions, acknowledging its faults, according to what is the prosecution’s contention, by paying precisely $24.3 million to the Treasury’s Office of Foreign Assets Control to settle civil charges that it conducted 116,421 transactions worth more than $260 million that violated US sanctions. 

Meanwhile, nothing is yet known about the fine, imposed by FinCen, which imposed a total civil penalty of $29.3 million, covering additional violations under the Bank Secrecy Act. According to government sources, the fine to be paid to FinCen would actually be just over $5 million.

The FinCEN spokesperson told the press that its investigation found that from February 2014 to December 2018, the Bittrex exchange did not maintain an effective AML program:

“Bittrex’s AML program failed to appropriately address the risks associated with the products and services it offered, including anonymity-enhanced cryptocurrencies.”

In a statement sent to the Reuters news agency, Bittrex reportedly said it was “happy to have fully resolved” the issue with OFAC and FinCEN on mutually agreed terms.

FinCen’s acting director, Himamauli Das, said:

“Bittrex’s failures created exposure to high-risk counterparties including sanctioned jurisdictions, darknet markets, and ransomware attackers. FinCEN has made clear that virtual asset service providers must implement robust risk-based compliance programs and meet their BSA reporting requirements, and will not hesitate to act when it identifies willful violations of the BSA.”

FinCen also found that the company did not maintain an effective AML program from February 2014 to December 2018. In some cases only two employees would have been responsible for reviewing more than 20,000 daily transactions for suspicious activity. Clearly a huge job and impossible for just two people to do effectively.

Could other exchanges run the same risk?

It remains to be seen now whether this proceeding could set a precedent for hitting other exchanges that have long been in the eye of the storm, such as Binance, which has already suffered heavy fines in several countries, and even the closure of its operations in others, such as Britain, Japan and Singapore.

In July, Binance was fined $3.4 million by the Dutch Central Bank, for illegal transactions that took place over a “prolonged period,” the central bank said, stretching from 21 May 2020 to at least 1 December 2021. In March it had been the turn of the other major US exchange, Coinbase, to be sanctioned with a $6.5 million dollar fine, by the Commodity Futures Trading Commission (CFTC) for allegations of trading “self-traded” digital assets.

The problem is always one related to the lack of precise and defined regulation in both the US and Europe on the cryptocurrency sector and digital assets in general. This legislative vacuum leaves room for interpretations and behavior bordering on legality up to the possibility of formal malfeasance on the part of crypto companies, which, not surprisingly, have long been themselves the first to ask the authorities to quickly approve clear and transparent rules for all players in the field.