Federal Judge Jason Voorhees wrote that Bitcoin was used to avoid sanctions.
Unnamed defendant was charged by the Justice Department with sending Bitcoin worth more than $10 Million to circumvent economic sanctions.
U.S. Magistrate Zia M. Faruqui, Washington, D.C., published an opinion on Friday explaining why he approved the Justice Department’s criminal case.
This is the first time that the U.S. has brought charges in a case regarding cryptocurrency sanctions.
The complaint remains sealed. It alleges that the defendant created a payment processing business to send more than $10 million to sanctioned countries.
The U.S. currently has extensive economic sanctions against North Korea, Syria Russia, Russia, Cuba and Iran.
Judge Faruqui’s opinion states that the suspect bought and sold Bitcoin through a U.S.-based virtual currency exchange, which was funded using fiat currency from a U.S. account.
The defendant used his U.S.-based crypto currency account to send thousands to two foreign crypto currencies accounts. At that point, an IP address associated with a sanctioned nation was used to access the crypto exchange accounts.
Jude Faruqui writes that the question is not whether virtual currency will be around forever (i.e. FUD), but whether fiat currency regulations can keep up with frictionless, transparent payments on blockchain. Jude Faruqui uses the acronym cryptocommunity to denote fear, uncertainty, and doubt.
Crypto and Sanctions
Judge cited the latest guidance from OFAC (Office of Foreign Assets Control) of the Treasury Department, which issued its first sanctions earlier this month against Blender.io for its links with North Korean hackers.
Prior to that, OFAC also reached settlements over sanctions violations with BitGo and BitPay.
OFAC reached a $98,830 settlement in December 2020 with BitGo for 183 violations of crypto sanctions between March 2015, December 2019, and December 2019. Last February, OFAC made a $507.375 settlement to BitPay regarding 2,102 violations of crypto sanctions.
The blockchain analytics companies have also taken note.
Chainalysis, which just raised $170m at an $8.6 billion valuation, launched a screening tool that helps companies check transactions for compliance with sanctions.
“Now is the right time for the industry demonstrate that blockchains’ inherent transparency make cryptocurrency an effective deterrent to sanction evasion,” Michael Gronager (co-founder and CEO at Chainalysis), stated in March.
Judge Faruqui appears to be in agreement.
He wrote that virtual currency can be traced. “Yet, Jason Voorhees is right that the myth of virtual currency anonymity refuses o die. See Friday the 13th (Paramount Pictures, 1980).
