Kraken, a U.S. cryptocurrency exchange, agreed Monday to pay more than $360,000 to the Treasury Department to settle accusations of sanctions violations involving virtual currency transactions by users in Iran.
The Treasury Department’s Office of Foreign Assets Control said Kraken, the second-largest crypto exchange by volume in the United States, had agreed to a settlement for enabling nearly $1.7 million of transactions to individuals who appeared to be in Iran between October 2015 and June 2019. The United States imposed sanctions against Iran in 1979, prohibiting the export of goods or services to people or entities in the country.
In its statement, the office said the maximum civil monetary penalty for the violations could be more than $270 million but determined that the settlement would be much less because Kraken had reported the potential violations. In addition, the company agreed to spend an additional $100,000 on new compliance controls.
“Kraken failed to exercise due caution or care for its sanctions compliance obligations,” the statement said. It added that the company had user data that showed “transactions appear to have been conducted from Iran.”
In a statement, Marco Santori, Kraken’s chief legal officer, said the company was “pleased to have resolved this matter.”
“Even before entering into this resolution, Kraken had taken a series of steps to bolster our compliance measures,” he said. “This includes further strengthening control systems, expanding our compliance team and enhancing training and accountability.”
The settlement comes at a tumultuous moment for the crypto industry. This month, one of Kraken’s rivals, Bahamas-based exchange FTX, collapsed after a run on deposits, sending the industry into one of the worst crises in its history. On Monday, another major crypto company, the lender BlockFi, filed for bankruptcy, citing the effect of FTX’s implosion.
Kraken, a private company valued at $11 billion that allows users to buy, sell or hold various cryptocurrencies, faced previous regulatory actions, including a $1.25 million penalty from the Commodity Futures Trading Commission for offering a prohibited trading service. Jesse Powell, the company’s co-founder and CEO, announced in September that he was stepping down after internal conflicts with employees and government investigations.
In July, The New York Times reported that the Office of Foreign Assets Control had been investigating Kraken since 2019. The previous month, Powell circulated a spreadsheet on messaging system Slack that appeared to show that Kraken had serviced accounts in sanctioned countries such as Iran. He said the data came from residence information listed on “verified accounts.”
Last month, the Office of Foreign Assets Control announced its largest penalty for sanctions violations by a crypto company, fining cryptocurrency exchange Bittrex $24 million for allowing customers in Cuba, Iran, Sudan, Syria and Russian-occupied Crimea to make virtual currency transactions valued at more than a reported $263 million.