The US Office of Foreign Assets Control (OFAC), a sanctions enforcement body under the US Treasury Department, announced that the American cryptocurrency company Exodus was ordered to pay more than 3 million dollars in fines for providing services to customers in Iran.
According to this US Treasury Department body, Exodus violated US sanctions by helping users in Iran access third-party exchanges and by recommending the use of VPNs to conceal their geographic location.
The Office of Foreign Assets Control (OFAC) of the US Treasury Department announced in a detailed statement on Tuesday, December 16, that it had reached a settlement with Exodus Movement, Inc. for the payment of 3,103,360 dollars to resolve the company’s potential civil liability for 254 violations of Iran-related sanctions.
New Restrictions Imposed on the Cryptocurrency Market in Iran
Exodus is a financial technology company incorporated in Delaware and headquartered in Omaha, Nebraska. Since 2016, it has offered the free Exodus Wallet software, which allows users to conduct transactions across various blockchains and use the services of partner digital exchanges, without the company itself holding customers’ digital assets or directly processing transactions.
According to the Office of Foreign Assets Control of the US Treasury Department, between October 17, 2017, and January 4, 2019, Exodus’s customer service unit provided technical and support services in 254 instances to users who identified themselves as “residents of Iran.”
Based on the statement, this assistance effectively enabled these users to continue using the Exodus wallet or the services of its partner exchanges.
The US Treasury Department statement said that in numerous cases, support staff—just as they did with other users—also suggested the use of VPNs to Iranian users. In several instances where users explicitly asked about the impact of US sanctions on their use of Exodus, support services were not discontinued.
This is despite the fact that Exodus had stated in its terms of service that the use of its services is prohibited in sanctioned countries, including Iran.
However, according to the US Treasury Department, this prohibition was not properly implemented through training and operational controls.
The issue became more sensitive when one of Exodus’s partner exchanges, referred to as Exchange A, announced in April 2018 that it would block access for users based in Iran in order to comply with US laws.
Iranian users who connected to this exchange through the Exodus wallet encountered errors, and support requests increased. By May 2018, Exodus managers and staff knew that the reason for the blockage was the exchange’s compliance with US sanctions against Iran. Despite this awareness, they continued responding to Iranian users and, in 12 specific cases, knowingly recommended that they use VPNs to conceal their location so the exchange could not detect that they were in Iran.
The Office of Foreign Assets Control of the US Treasury Department assessed these 12 cases as “egregious” and involving assistance in circumventing sanctions controls.
In one example of correspondence cited by the Office of Foreign Assets Control of the US Treasury Department, an Exodus support representative wrote to an Iranian user on May 20, 2018, that the partner exchange had blocked Iran due to compliance with US laws, but also stated in the same response that some Iranian customers had reported they were still able to trade using VPNs.
In another case on May 23 and 24, 2018, the user was first told that trading was not possible due to sanctions, and the next day the same representative recommended changing the IP address via a VPN so that the exchange would not realize the user was in Iran.
The Office of Foreign Assets Control of the US Treasury Department described this behavior not merely as a technical error, but as a deliberate action to undermine sanctions controls.
