Erik Voorhees’ defunct crypto exchange ShapeShift has been ordered to pay a $750,000 fine to settle its case with the US Treasury after it processed $12.6 million in potentially sanction-violating crypto transactions.
The order, published by the Office of Foreign Assets Control (OFAC) yesterday, stems from 17,183 possible sanctions violations involving the firm’s offering of digital asset transactions to users in Cuba, Iran, Sudan, and Syria between 2016 and 2018.
ShapeShift usage from Iranian users alone made up 16,839 of these possible sanction violations.
The exchange had no sanctions compliance program in place to check users for any possible violations, which OFAC claims showed “a minimal degree of caution or care for its sanctions compliance obligations.”
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Additionally, OFAC determined that ShapeShift likely knew it was dealing with sanctioned jurisdictions thanks to the IP address data it was collecting.
It only introduced such a program after OFAC issued it a court subpoena. It then began to screen for individuals from OFAC’s Specially Designated Nationals and Blocked Persons List or any sanctioned jurisdictions.
As such, OFAC determined that “ShapeShift did not voluntarily self-disclose the apparent violations and that the apparent violations constitute a non-egregious case.”
Fine reflects ShapeShift’s lack of operations
The settlement was reduced from a potential base civil monetary penalty of $39.5 million to $750,000.
This is because ShapeShift responded to OFAC’s investigations in good faith and implemented the relevant sanctions compliance protocols.
The fact that ShapeShift was a relatively small firm at the time and is now defunct was also considered. Therefore, OFAC said ShapeShift isn’t likely to be offering crypto transactions any time soon and remains in “a highly constrained financial condition.”
The volume of crypto representing the possible sanctions violations was also minimal compared to its wider operations, and OFAC took into account ShapeShift’s lack of penalties five years before the earliest questionable crypto transactions.
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Last year, the exchange was ordered to pay a $275,000 fine to settle an illegal securities case with the US Securities and Exchange Commission and was issued a cease-and-desist order.
It found the exchange was using its own crypto assets to trade against its own users, and that it misleadingly branded itself as a simple “vending machine” instead of a sophisticated counterparty.
ShapeShift shut down its corporate operations in 2021 and converted itself into a decentralized autonomous organization governed by holders of its FOX token.
ShapeShift’s CEO Erik Voorhees is now pivoting to the AI industry and has launched his own AI platform, which he says will rival Sam Altman’s ChatGPT and Dario Amodei’s Claude.
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Source: https://protos.com/shapeshift-pays-750k-fine-over-more-than-17000-possible-sanctions-violations/
