September 24, 2023

Kraken Under Investigation For Violation Of OFAC Sanctions

On Tuesday, a report quoting five people with knowledge of the matter said that digital currency exchange, Kraken, was under federal investigation.

According to the sources, the investigation into the exchange had started back in 2019 for the alleged violation of the US sanctions.

The exchange has been accused of permitting users from sanctioned countries, such as Iran, to access its services.

OFAC investigation

On July 26th, the New York Times reported that the Office of Foreign Assets Control (OFAC) of the US Treasury Department was investigating the crypto exchange Kraken, which is based in San Francisco.

Jesse Powell founded the crypto exchange back in 2011 and it is one of the oldest digital currency exchanges that are operating globally.

According to the NYT report, the five people who shared the information preferred to stay anonymous because they were worried about retribution from the company.

The editorial’s summary reveals that Kraken has been under OFAC’s investigation since 2019 because it allowed people from sanctioned countries to use its platform to buy crypto assets.

According to the people with knowledge of the matter, they expect that a fine would be imposed by the US government on the San Francisco-based exchange for sanctions violation.

Other fines

This would not be the first time for Kraken to have a fine imposed against it. The digital currency exchange had also been fined last year by the Commodity Futures Trading Commission (CFTC) in the US.

This was because the exchange had been found guilty of offering its clients margined retail commodity transactions illegally for digital currencies.

The company had had a fine of $1.25 million imposed against Payward Ventures Inc., its parent firm. Moreover, the CFTC had also told the company to cease and desist from any other violations.

However, both Kraken and the US Treasury did not confirm any ongoing investigation.

The inquiry

Those familiar with the matter had said that a former employee of Kraken had initiated legal proceedings against the exchange, which kick-started the investigation by the OFAC in 2019. The case had later been settled.

But, that is when OFAC had begun looking into the accounts of the exchange and discovered that some of them stemmed from Cuba, Syria and Iran.

This report about Kraken being under a federal inquiry comes after a recent report about crypto exchange Coinbase being investigated by the US Securities and Exchange Commission (SEC) because of its alleged offering of unregistered securities.

One common thing to note about the reports about Kraken and Coinbase is that both of them cite people with knowledge of the matter, but no sources have been named.

In recent times, this has become a common occurrence in the crypto space. Reports about now bankrupt crypto lender Celsius had also been first reported by anonymous sources.

It appears that several crypto exchanges are finding themselves in hot water now that regulatory scrutiny on crypto companies is increasing, especially after the recent collapse that occurred in the crypto market.

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