US brings first-of-its-kind criminal charges of Bitcoin-based sanctions-busting

Citizen allegedly moved $10m-plus in BTC into banned nation


US prosecutors have accused an American citizen of illegally funneling more than $10 million in Bitcoin into an economically sanctioned country.

It's said the resulting criminal charges of sanctions busting through the use of cryptocurrency are the first of their kind to be brought in the US.

Under the United States' International Emergency Economic Powers Act (IEEA), it is illegal for a citizen or institution within the US to transfer funds, directly or indirectly, to a sanctioned country, such as Iran, Cuba, North Korea, or Russia. If there is evidence the IEEA was willfully violated, a criminal case should follow. If an individual or financial exchange was unwittingly involved in evading sanctions, they may be subject to civil action. 

The Office of Foreign Assets Control, the US agency responsible for enforcing the IEEA, for example, has settled with companies BitGo and BitPay for processing digital currency transactions from customers in sanctioned countries. BitGo and BitPay agreed to cough up $98,830 and $507,375 respectively to end civil proceedings against them.

The Dept of Justice, however, appears to be prosecuting its first criminal case against an individual who allegedly knowingly moved cryptocurrencies into an off-limits country.

An unnamed American citizen allegedly used a US-based IP address to run an online payments platform based in a redacted sanctioned country. The service advertised itself as being "designed to evade US sanctions" and claimed its transactions were untraceable, it was alleged.

We're told the defendant bought and sold Bitcoin using a US-based online currency exchange using fiat currency from a US bank account. Thousands of dollars were sent from this exchange to two accounts in a foreign-based online exchange, which quickly accessed from IP addresses in the sanctioned nation, it is claimed. The defendant used these two accounts to move at least $10m in Bitcoin from the US to the sanctioned country for the payment platform's users, it is alleged.

US Magistrate Judge Zia Faruqui, of the Washington DC courts, reckoned there was "probable cause" to hear the DoJ's claims and gave the case the go-ahead.

"In the instant complaint, the government alleged that defendant conspired to violate the IEEPA and defraud the United States in violation of 18 USC § 371 ... This court concluded that there was probable cause to believe defendant committed such violations," he wrote in an opinion filed on Friday [PDF]. 

The criminal complaint is under seal; the details of the defendant and case have been redacted in Judge Faruqui's opinion. He dismissed claims cryptocurrency transactions were untraceable, and were not subject to economic sanctions, weirdly enough with references to Saturday Night Live parodies of the late John McLaughlin, the American telly personality and political commentator.

"Defendant's transmission of virtual currency to the sanctioned country violated US sanctions. Independently, Defendant faces liability because his transactions caused the virtual currency exchanges, perhaps unwittingly, to violate sanctions," the judge added. ®


Other stories you might like

Biting the hand that feeds IT © 1998–2022