According to claims, Poloniex didn’t follow the rules of checking and verifying their customers’ identities correctly from 2014 to 2019.
Poloniex LLC, a US company that was once related to Poloniex cryptocurrency exchange, has agreed to pay $7.59 million to settle allegations of breaking sanctions rules made by the US Treasury Department’s Office of Foreign Asset Control (OFAC). OFAC is a group responsible for enforcing economic and trade sanctions in the US.
The Poloniex platform broke various sanctions rules, nearly 66,000 times. Customers from countries such as Crimea, Cuba, Iran, Sudan, and Syria were able to trade cryptocurrency worth up to $15 million together between January 2014 and November 2019, according to a statement from OFAC.
Poloniex started operating in January 2014, but it didn’t have a program to follow the rules of the sanctions until May 2015. The company’s program also didn’t apply to customers who were already using the platform from countries that were under sanctions. So, those customers were allowed to continue trading on Poloniex. This information was shared in a document from the US Treasury.
Poloniex tried to identify and stop accounts that had connections to Iran, Cuba, Sudan, Crimea, and Syria according to their program to follow sanctions rules. But even after this, some customers from these countries were still able to use Poloniex to trade cryptocurrencies, according to OFAC.
Poloniex crypto exchange is now owned by a group of companies, including Justin Sun’s Tron. Before that, another US company called Circle briefly owned Poloniex but sold it after less than two years. Poloniex LLC is the only remaining US company after the exchange was sold.
In the previous year, Poloniex and another crypto exchange called Huobi said they would work together in a “strategic partnership”. They planned to improve the development of Huobi Token’s ecosystem. Justin Sun, who is also an adviser to Huobi, is the owner of Poloniex.
OFAC mentioned in their report on Monday that Poloniex LLC was a small and new company at the time of most of the alleged violations. They also said that Circle, which owned Poloniex for some time, had improved Poloniex’s program to follow sanctions rules. These two points were considered when calculating the severity of the penalty that Poloniex has to pay.
OFAC also mentioned that both Circle and Poloniex worked with them and provided cooperation. This was another factor in Poloniex’s favor when deciding how severe the penalty should be.
OFAC stated that both Circle and Poloniex cooperated with them, which was taken into account when deciding the severity of the penalty against Poloniex.
CORRECTION (May 1, 2023, 19:30 UTC): Clarifies the entities involved.
