Yesterday, the Office of Foreign Asset Control (OFAC) settled sanctions violations with Poloniex, LLC, a Delaware company with its principal place of business in Boston, Massachusetts. According to reports, Poloniex operated an online trading and settlement previously doing work as Poloniex Inc.
Poloniex has agreed to pay $7,591,630 to settle its multiple violations of regulatory norms. According to the report released by OFAC, the company sued for 65,942 apparent violations of multiple section violations. The OFAC has released a report under the enforcement release section to inform about the settlements between them. In the report, it’s clarified that, between January 2014 and November 2019, Poloniex provided services to the user in sanctioned jurisdictions to use online digital assets-related transactions. The transactions consist of trades, deposits, and withdrawals with a total valuation of $15,335,349. Additionally, Poloniex was aware of their location based on know-your-customer (KYC) information and internet protocol address data.
For those who are not aware, Poloniex began its operations in 2014 and offered its customers online digital assets trading and settlement that facilitated users to fund their accounts and perform trading activities. In May 2015, the company implemented guidelines that provided data on customers who were under OFAC-sanction jurisdictions. Additionally, the OFAC clarified that existing customers were not scrutinized in this manner.
In 2015, Poloniex also started tracking the IP address of the users to detect logins from the sanctioned jurisdictions by OFAC. It took additional logins and informed personal account holders and in some cases, it has taken suo moto steps and closed the accounts. However, the report highlighted that it didn’t block these IP addresses operating from the Crimea region of Ukraine until 2017.
Several users from countries like Sudan, Iran, Cuba, Seria, and Crimea were under the sanctioned jurisdictions but the Poloniex platform was still being used by some users. It appeared to be based in these countries to conduct online transactions involving digital assets (the “Apparent Violations”). According to reports, 232 users from the sanctioned area performed 65,932 digital transactions worth $$15,335,349.
Based on the physical address information and IP address information associated with the users implicated in the Apparent Violations, Poloniex had grounds to believe that these users were based in sanctioned regions. The regulatory bodies in the United States seem very active in sending strong messages to violators. A few days back, the United States Securities and Exchange Commission (SEC) banned Seattle-based company Conime for fraudulent activities and misleading customers.
OFAC has been very active in sending strong messages to violators. In August 2022, the Office for Foreign Assets Control sanctioned the virtual currency mixer Tornado Cash. The platform has been used to launder more than $7 billion worth of virtual currency since its creation in 2019. Additionally, the Tornado Cash platform was used by the Lazarus group, a state-sponsored hackers group of North Korea to launder funds over $455 through the virtual currency mixer.