The U.S. Justice Department has charged a citizen, whose name has not been released, with sending more than $10 million in bitcoins to circumvent economic sanctions.
In his decision released Friday, U.S. Magistrate Judge Zia M. Farooqi of Washington, D.C., explained why he agreed to the criminal case.
This is the first time U.S. authorities have brought a criminal case for sanctions violations involving cryptocurrency.
The authors of the lawsuit, the contents of which remain classified, accuse the defendant of setting up a payment processing company as a front to transfer more than $10 million to a sanctioned country.
Comprehensive U.S. economic sanctions are currently imposed on Russia, North Korea, Syria, Cuba and Iran.
According to Judge Farooqi’s ruling, Defendant bought and sold bitcoin using a U.S.-based “virtual currency exchange,” making fiat currency deposits from a U.S. bank account.
The defendant then used his account on that cryptocurrency exchange to send a large sum of money to two foreign cryptocurrency exchange accounts, after which they were accessed by someone with an IP address tied to a sanctioned country.
The judge cited the recent example of the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), which this month imposed the first sanctions on the cryptocurrency mixer Blender.io for its ties to North Korean hackers.
Earlier, the Office also reached a settlement in a case involving sanctions violations by BitGo and BitPay.
In December 2020, OFAC reached a settlement with BitGo, ordering the company to pay $98,830 in compensation for 183 cryptocurrency sanctions violations between March 2015 and December 2019. Last February, the agency reached a settlement already with BitPay, imposing a fine of $507,375 for 2,102 cryptocurrency sanctions violations.
Blockchain analytics companies have also taken notice of the sanctions situation. This year, Chainalysis (which recently raised $170 million at a valuation of $8.6 billion) launched a special tool to help companies check transactions for sanctions violations.
It’s time for the industry to demonstrate that the inherent transparency of blockchains makes cryptocurrency a powerful deterrent against sanctions evasion, Chainalysis co-founder and CEO Michael Gronager said in March.
Judge Farooqi agrees with that statement:
Virtual currency allows itself to be tracked,” he wrote in his decision. – However, like Jason Voorhees, the myth of virtual currency’s anonymity refuses to die. See: the movie Friday the 13th (Paramount Pictures, 1980).