- ShapeShift will pay a $750,000 penalty to settle charges with the U.S. Treasury for processing over $12.6 million in crypto transactions involving sanctioned countries.
- The U.S. Office of Foreign Assets Control (OFAC) identified 17,183 possible sanctions violations between 2016 and 2018, with most cases involving Iranian users.
- ShapeShift lacked a compliance program to detect sanctioned users until after it received a court subpoena.
- The settlement amount dropped from a possible $39.5 million due to the company’s cooperation, implementation of compliance measures, and current defunct status.
- Last year, the exchange also paid a $275,000 fine to the SEC over illegal securities trading and has since transitioned to a decentralized organization.
The U.S. Treasury has ordered defunct crypto platform ShapeShift to pay a $750,000 fine following findings that it processed $12.6 million worth of cryptocurrency transactions with users in countries under U.S. sanctions. The settlement comes after an investigation into activity dating back to between 2016 and 2018.
According to the U.S. Office of Foreign Assets Control (OFAC), ShapeShift facilitated 17,183 potential sanctions violations by enabling digital asset transactions for users in Cuba, Iran, Sudan, and Syria. The majority—16,839 transactions—came from users in Iran. OFAC stated that ShapeShift did not have a sanctions compliance program in place during this period, showing “a minimal degree of caution or care for its sanctions compliance obligations.”
OFAC’s published order noted that ShapeShift likely knew it was interacting with users from sanctioned countries by analyzing the IP address data it collected. The company only implemented a sanctions compliance screening process after an OFAC subpoena, at which point it began checking customers against the Specially Designated Nationals and Blocked Persons List.
In determining the final penalty, OFAC considered that ShapeShift responded to its investigation in good faith and put compliance measures in place after being notified. The agency also considered the firm’s small size, the fact that it is now shut down, and that the overall volume of illicit transactions made up a small part of its business. The settlement amount was reduced from a potential maximum of $39.5 million to $750,000 due to these factors. OFAC described it as a “non-egregious case” and noted that ShapeShift did not voluntarily report the violations.
The company has faced other regulatory actions. Last year, ShapeShift agreed to a $275,000 settlement with the U.S. Securities and Exchange Commission (SEC) after being accused of trading against its users using its own crypto tokens. The SEC said the firm misrepresented itself as a “vending machine” rather than a trading counterparty.
ShapeShift ended its corporate operations in 2021, converting ownership control to a decentralized autonomous organization (DAO) managed by holders of its FOX token. CEO Erik Voorhees has since shifted focus to the Artificial Intelligence sector, recently launching a new AI platform he claims will rival existing products from leading U.S. tech companies. For further details, reference the official OFAC settlement order here and Voorhees’ statements on his AI endeavors here.
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