ShapeShift Pays Penalty for Sanctions Breaches

The now-shuttered cryptocurrency exchange, ShapeShift, has agreed to a $750,000 settlement with the U.S. Treasury Department's Office of Foreign Assets Control (OFAC). The settlement resolves allegations that ShapeShift violated sanctions by processing transactions from users in sanctioned regions like Cuba, Iran, Sudan, and Syria between December 2016 and October 2018.

Key Allegations:

• Lack of a sanctions compliance program to screen users and transactions.
• Processed over $12.5 million in crypto transactions from sanctioned countries.
• Failed to implement compliance measures until after receiving an administrative subpoena from OFAC.
• Had reason to know about users' locations based on IP address data.

ShapeShift, founded by Erik Voorhees in 2014, aimed to provide anonymous cryptocurrency swaps, allowing users to trade digital assets without KYC verification. This lack of KYC eventually led to issues with regulatory bodies.

Background:

ShapeShift faced scrutiny from the Securities and Exchange Commission (SEC) regarding its status as an unregistered broker or exchange. This culminated in a cease-and-desist order and a $275,000 fine last year. ShapeShift ceased operations in 2021.

The Treasury Department considered ShapeShift's limited assets and shuttered status when determining the penalty amount.

Key Takeaways:

• Even defunct crypto exchanges can face penalties for past sanctions violations.
• The importance of implementing robust sanctions compliance programs is paramount.
• Anonymity-focused platforms can attract regulatory scrutiny.