This month, a U.S. federal judge prosecuted an American citizen who sent over $10 million in Bitcoin to a blacklisted country, in clear violation of sanctions rules.
The U.S. citizen violated the International Emergency Economic Powers Act by sending the virtual assets to a comprehensively sanctioned country, which could be either Cuba, Iran, North Korea, Syria or Russia.
According to the sealed report, the unnamed individual used a crypto exchange in the United States to send over $10 million in Bitcoin to a virtual asset exchange registered in a sanctions-hit country, possibly Russia, Cuba, North Korea, Syria or Iran. The suspect even acknowledged that they were evading sanctions by relying on cryptocurrency instead of traditional payment methods, in clear violation of sanctions.
“The Department of Justice can and will criminally prosecute individuals and entities for failure to comply with [the Office of Foreign Assets Control]’s regulations, including as to virtual currency,” said Judge Zia Faruqui. “Prohibited financial services include any transfer of funds, directly or indirectly ... from the U.S. or by a U.S. person [or] entity, wherever located, to the sanctioned entity [or] country. And lest there be any doubt, financial service providers include virtual currency exchanges.”
“What we see here is the first time that the Department of Justice has charged a criminal case involving the use of cryptocurrency to evade sanctions, Ari Redbord, head of legal and governmental affairs at the crypto fraud-monitoring firm TRM Labs, told WIRED.
In a humorous jibe that nonetheless communicated an explicit warning to individuals seeking to use crypto to circumvent sanctions, a federal magistrate judge in D.C. declared that not only was crypto trackable, but it fell under sanctions rules: “Issue One: virtual currency is untraceable? WRONG … Issue Two: sanctions do not apply to virtual currency? WRONG,” Faruqui wrote.
Many believe crypto cannot be traced despite all transactions being publicly recorded on a digital ledger. This relative anonymity make virtual assets attractive to criminals and thieves, as well as privacy advocates. However, this has proven to be incorrect. “The thing that’s so unique about crypto is you can actually trace and track the flow of these funds on an entirely open ledger,” Redbord told WIRED. “It’s only because crypto moves and lives on an open ledger on the blockchain that allowed for this type of investigation.”