This is the first criminal prosecution in a sanctions case involving cryptocurrencies. Whether it’s unclear what country the defendant transferred their funds to, it must be one of the US-sanctioned countries: Iran, Cuba, Venezuela, Syria, North Korea, or Russia.
“The Department of Justice can and will criminally prosecute individuals and entities for failure to comply with OFAC’s regulations, including as to virtual currency,” said the U.S. Magistrate Judge Zia M. Faruqui of Washington, D.C. in his nine-page criminal opinion.
According to Judge Faruqui’s opinion, the defendant has been trading Bitcoin on the US-registered crypto exchange, topping their account with fiat from a traditional US financial institution. Then, the US citizen used it to transmit over $10m worth of Bitcoins to the account on the foreign-based cryptocurrency exchange, which was accessed from the sanctioned country IP.
“The question is no longer whether virtual currency is here to stay (i.e., FUD) but instead whether fiat currency regulations will keep pace with frictionless and transparent payments on the blockchain. OFAC’s recent guidance confirmed that “sanctions compliance obligations apply equally to transactions involving virtual currencies and those involving traditional fiat currencies,” the judge wrote, citing a popular crypto acronym standing for Fear, Uncertainty, Doubt.
Earlier this year, the blockchain data platform Chainalysis presented two new sanctions screening tools amid growing concerns that Russian oligarchs can use crypto to wash their illegal proceeds. US Treasury also sanctioned Russian mining giant BitRiver, accusing them of helping the country to monetize its natural resources.
