US federal judge approves of Justice Dept criminal complaint on using crypto to evade sanctions

Published at: May 16, 2022

The United States Department of Justice may move forward on a criminal prosecution case against a United States citizen who allegedly violated sanctions through cryptocurrency.

According to a Friday opinion filing in U.S. District Court for the District of Columbia, the unnamed individual, who is the subject of a criminal investigation by the Justice Department allegedly sent more than $10 million in Bitcoin (BTC) from a U.S.-based crypto exchange to an exchange in a country for which the U.S. currently imposes sanctions — suggesting Russia, Cuba, North Korea, Syria or Iran. The filing alleged the individual “conspired to violate the International Emergency Economic Powers Act” and conspired to defraud the United States.

The individual allegedly “proudly stated the Payments Platform could circumvent U.S. sanctions” using BTC and knew about sanctions on the country. According to the filing, the U.S.-based crypto exchange had the user’s information through Know Your Customer (KYC) compliance policies.

“The Department of Justice can and will criminally prosecute individuals and entities for failure to comply with [Office of Foreign Assets Control]’s regulations, including as to virtual currency,” said agistrate Judge Zia Faruqui in his opinion. “Prohibited financial services include any transfer of funds, directly or indirectly [...] from the U.S. or by a U.S. person/entity, wherever located, to the sanctioned entity/country. And lest there be any doubt, financial service providers include virtual currency exchanges.”

Faruqui added:

“The question is no longer whether virtual currency is here to stay (i.e., FUD) but instead whether fiat currency regulations will keep pace with frictionless and transparent payments on the blockchain.”

Related: US Treasury Dept sanctions 3 Ethereum addresses allegedly linked to North Korea

The Treasury Department’s Office of Foreign Assets Control, or OFAC, is responsible for administering sanctions for the United States. Following Russia’s military invading Ukraine, the government office warned U.S. residents not to use digital assets to benefit certain Russia-based entities and individuals and added Russia-based darknet marketplace Hydra, crypto mining services provider BitRiver and digital currency exchange Garantex to its list of “Specially Designated Nationals,” a designation which generally prohibits Americans from doing business with them.

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United States
Cryptocurrencies
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Sanctions
Department Of Justice
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