US DOJ Prosecutes Criminal for Using Crypto To Skirt Sanctions

Key Insights:

• The U.S. Department of Justice has laid the first criminal charges for using cryptos to evade sanctions.
• The accused individual has approximately sent $10 million in bitcoin to a sanctioned nation.
• The accused proudly stated that the service could circumvent U.S. sanctions, forgetting crypto’s ease of traceability.

The U.S. Department of Justice might charge an unnamed American over “willfully violating” international sanctions by sending millions in cryptocurrency.

Possibly the first criminal prosecution of crypto-related sanction evasion, the case was revealed by District of Columbia Magistrate Judge Zia Faruqui in an official opinion ruling on Friday.

Over $10 million transferred to a sanctioned country

However, the Judge did not mention the name of the payment platform used for crypto transactions and the “comprehensively sanctioned country” the defendant dealt with. Currently, five countries, Russia, Cuba, North Korea, Iran, and Syria, fall under U.S. sanctioned nations.

The defendant was accused of sending more than $10 million in bitcoin (BTC) to a crypto exchange in one sanctioned nation.

Per the strongly worded ruling, the accused created an account with a U.S.-based crypto exchange to buy and sell cryptos such as ether (ETH). The perpetrator then used this account to send thousands of dollars to two accounts at a foreign-based virtual currency exchange. It noted,

“Defendant used these two accounts to transmit over $10 million worth of bitcoin between the United States and Sanctioned Country for the Payments Platform’s customers.”

The case came into the limelight because the accused believed that crypto was “untraceable.” In fact, the defendant “proudly stated the Payments Platform could circumvent U.S. sanctions.”

The Judge wrote,

“[The defendant] faces liability because his transactions caused the virtual currency exchanges—perhaps unwittingly—to violate sanctions.”

OFAC Regulations include cryptos under law

The Office of Foreign Assets Control (OFAC), an arm of the U.S. Treasury Department, released regulations in 2020, which made clear that cryptocurrencies used for transactions to sanctioned nations are no different from fiat transactions to those countries.

The perpetrator has allegedly violated the International Emergency Economic Powers Act (IEEPA) and defrauded the United States. It was clear that the actions also violated regulations put forward by the OFAC.

But it seems that this isn’t the first U.S. case directly related to the use of bitcoin to evade sanctions. In 2019, Ethereum Foundation researcher Virgil Griffith was charged for helping North Korea “launder money and evade sanctions.”

The Judge concluded his nine-page opinion on this still-sealed case by raising two issues,

“Issue One: virtual currency is untraceable? WRONG … Issue Two: sanctions do not apply to virtual currency? WRONG.”