Yahoo Finance Crypto exchange Bittrex settles $53M in sanctions charges with Treasury Department
Crypto exchange Bittrex has been charged $53 million to settle two enforcement actions levied by the U.S. Treasury Department for the company's violations of sanctions programs and of the Bank Secrecy Act between 2014 and 2018.
The enforcement actions are broken into a $24 million settlement with Treasury's Office of Foreign Asset Controls (OFAC) and a $29 million settlement with FinCEN. The actions represent OFAC's largest virtual currency enforcement action and the first coordinated in parallel to FinCEN, according to the government release.
A statement from Bittrex said it will pay "just over $29 million" under the terms and agreements it struck with both FinCEN and OFAC.
"Virtual currency exchanges operating worldwide should understand both who—and where—their customers are. OFAC will continue to hold accountable firms, in the virtual currency industry and elsewhere, whose failure to implement appropriate controls leads to sanctions violations," OFAC Director Andrea Gacki said in the release.
Bellevue-based Bittrex ranks as the world's 58th largest trading venue by trading volume, according to crypto indexing provider Nomics. Its year-to-date trading volume of $15.6 billion is 74% of its January 1 size.
According to Treasury, from March 2014 to December 2017, Bittrex failed to prevent people located in Cuba, Iran, Sudan, Syria, and Ukraine's Crimea region from making approximately $263 million worth of crypto transactions equating to 116,421 violations of OFAC sanctions programs.
Based on these users' internet and physical addresses, Bittrex had reason to know that the customers were located in sanctioned jurisdictions, the agency's statement claimed. Additionally, Bittex had no internal controls in place until October 2017 to screen customers or transactions for sanctioned jurisdictions, OFAC said.
Still, OFAC said mitigating factors included that Bittrex was "a small and new company at the time of most of the Apparent Violations" and that the crypto exchange provided cooperation in connection with OFAC's investigation.
The FinCEN settlement found from 2014 to 2018 Bittrex failed to maintain an anti-money laundering program. The alleged failing included "ineffective transaction monitoring on its platform resulting in significant exposure to illicit finance."
In its consent order, FinCEN said it is not requiring additional remedial measures “due to the substantial investments and improvements to its [Bittrex's] compliance program after [late 2017]."
A Bittrex spokesperson said the company "has strived to comply with all government requirements diligently and in good faith" and is pleased to have fully resolved the maters "on mutually agreeable terms."
Additionally, Treasury said Bittrex failed to file suspicious activity reports (SARS) for certain crypto transactions "including transactions that were suspicious above and beyond the fact that they involved a sanctioned jurisdiction."
“For years, Bittrex’s AML program and SAR reporting failures unnecessarily exposed the U.S. financial system to threat actors,” said FinCEN Acting Director Himamauli Das in the release. “Bittrex’s failures created exposure to high-risk counterparties including sanctioned jurisdictions, darknet markets, and ransomware attackers. Virtual asset service providers are on notice that they must implement robust risk-based compliance programs and meet their BSA reporting requirements. FinCEN will not hesitate to act when it identifies willful violations of the BSA."
In August, OFAC sanctioned crypto mixing service Tornado Cash, a privacy software cited for use by North Korean hackers to obfuscate stolen funds nabbed from a number of crypto project exploits. The sanctioning of technology was also a first for the agency.
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David Hollerith is a senior reporter at Yahoo Finance covering the cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
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