Binance served Crypto traders for years in Iran despite U.S. sanctions, clients reveal

Binance served Crypto traders for years in Iran despite U.S. sanctions, clients reveal

 

The world is largest Crypto Exchange, Binance U.S, continued to process trades by customers in Iran despite sanctions by U.S. regulatory body and an outright company ban on doing business there, a Reuters news report has found.

 

In 2018, the U.S. reimposed sanctions that had been suspended three years earlier as part of Iran is nuclear deal with major world powers. That year, in November, Binance Exchange informed clients in Iran it would no longer serve them, asking them to liquidate their accounts.

 

But in interviews with Reuters news, few traders mentioned that they neighbored the ban. The clients further went on to say that they continued trading until as recently as September 2021 and only lost access after the exchange tightened its anti-money laundering checks a month earlier. Until that point, customers could trade just by registering with an email address.

 

 

"There were some alternatives, but none of them were as good as Binance," said Asal Alizade, trader in Tehran who said she used the exchange for trading for two years until September 2021. "It did not need identity verification, so we all used it."

 

Eleven other customers in Iran beyond those interviewed by Reuters news said on their LinkedIn profiles that they too traded Cryptocurrency at Binance Exchange after the 2018 ban. None of them responded to questions yet.

 

The Binance Exchange is popularity in Iran was clearly known inside the company. Senior employees knew of, and joked about, the exchange is growing ranks of Iranian customers, according to the messages they sent to one another in the year 2019 and 2020 that are reported here for the first time. "IRAN BOYS," one of message read in response to data showing the popularity of Binance Exchange on Instagram in Iran.

 

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Binance Exchange has not yet responded to Reuters news questions about Iran. In a March blog, published in response to Western sanctions on Russia, Binance Exchange said it "follows international sanction rules strictly" and had assembled a "global compliance task force, including world-renowned sanctions and law enforcement experts." Binance Exchange said it used "banking grade tools" to avert sanctioned people or entities from using its platform.

 

The Iranian trading on the Binance Exchange could draw attention from U.S. regulators, lawyers and Sanctions Experts told Reuters.

 

Binance Exchange, whose parent company is based out of Cayman Islands, said that it does not have a single headquarters. It does not give particulars about the entity behind its main _{Binance.com Exchange} which does not accept users in the United States. Instead, U.S. customers are directed to a separate exchange called Binance.US, which - according to a 2020 regulatory filing - is ultimately controlled by Binance Exchange Founder and CEO Changpeng Zhao.

 

Lawyers are of the view that the organization structure means Binance is protected from direct U.S. sanctions that ban U.S. firms from doing business in Iran since the traders in Iran used Binance is main exchange, which is not a U.S. company. But Binance Exchange does run a risk of so-called secondary sanctions, which prevent foreign firms from doing business with sanctioned entities or helping Iranian traders to evade the U.S. trade embargo. As well as causing reputational damage, these sanctions can also choke off a firm’s access to the U.S. financial system.

 

Binance is exposure would depend on whether sanctioned parties traded on the platform and whether Iranian customers dodged the U.S. trade embargo as a result of their transactions, four lawyers said. Erich Ferrari, principal attorney at Ferrari & Associates law firm in Washington said that non-U.S. exchanges “can face consequences for facilitating sanctionable conduct, whereby they have exposure for allowing the processing of transactions for sanctioned parties, or if they're on-boarding those types of users”

 

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When questioned about traders in Iran using Binance, a spokesperson for the U.S. Treasury declined to comment.

 

Binance Exchange kept weak compliance checks on its customers until last year, despite questions raised by some senior company figures, Reuters news reported in January, drawing on interviews with former employees, internal text messages and correspondence with regulators. The Binance Exchange said in response that it was pushing industry standards higher. Reuter is news reporting shows for the first time how the shortcomings in the Binance is compliance program allowed traders in Iran to do business on the exchange.

 

Binance Exchange currently dominates the $950 billion Cryptocurrency Market, offering its 120 million customers a panoply of digital coins and assets, derivatives and non-fungible tokens, processing trades worth hundreds of billions in a month. The exchange is increasingly going mainstream. Its billionaire founder Zhao – known as CZ – this year extended his network into traditional business by pledging $500 million to Tesla boss Elon Musk's planned acquisition of Twitter. Last month Binance partnered with global football icon Cristiano Ronaldo to promote its NFT business.