KRAKEN EXCHANGE LAWSUIT

Trevor, Woojin & Marbel

TABLE OF CONTENT

01.

02.

BOTTOM LINE UP FRONT

FACTS OF THE CASE / LEGAL AUTHORITY

What’s the case about?

03. ISSUE

04. RULE

What exactly happened – which legal authority?

What law has been broken?

BLUF

05. ANALYSIS Outcome of the case

TERMINOLOGY01.

02.

OFAC – OFFICE OF FOREIGN ASSETS COUNCIL

AGGREVATING VS MITIGATING FACTOR

Financial intelligence and enforcement agency of the US Treasury Department. It administers and enforces economic and trade sanctions in support of US national security and foreign policy objectives

03. IP BLOCKING

04. GEOLOCATON

Any facts that increase the level of severity of any criminal activity. Any fact or circumstance that lesses the severity or culpability of a criminal act

05. BLOCKCHAIN Distributed database that maintains a continuously growing list of ordered records, called blocks

Process of identifying the geographical location of a person or device by means of digital information processed by the internet

Configuration of a network service that blocks request from hosts with certain IP addresses.

BOTTOM LINE

San Francisco based Virtual Crypto Currency Exchange company

daily trading volume is around $333 million 9 million users worldwide (2023)

Sued by OFAC – breaching its regulations regarding trading with citizens from Iran which is forbidden.

FACTS & ISSUE

Kraken Case

01.

FACTS

ISSUE

Maintained anti-laundering and sanctions compliance program. IP address information @ onboarding 826 transactions from Iran –> $ 1,680,577 OFAC – Office of Foreign Assets Control

Kraken engaged in 826 apparent violations of

the Iranian Transaction and Sanctions

Regulations $ 1,680,577 from Iran

“IRANIAN TRANSACTIONS AND SANCTIONS REGULATIONS

31 C.F.R. §560.204

31 CFR § 560.204

826 violations of the Iranian Transactions and Sanctions Regulations 560.204 prohibits unauthorized export and re-export, sale or supply, directly or indirectly from the United States or by an US person, wherever located, of any goods, technology or services to Iran or the Government of Iran.

SETTLEMENT OF $362,158.70

MAXIMUM CIVIL MONETARY PENALTY APPLICABLE IN THIS MATTER IS $272,228,96.

ACCORDINGLY, UNDER OFAC’S ECONOMIC SANCTIONS ENFORCEMENT GUIDELINES THE BASE CIVIL MONETARY PENALTY APPLICABLE THE SUM OF ONE-HALF OF THE TRANSACTION VALUE FOR EACH APPARENT VIOLATION, WHICH IS $840,288.55.

ANALYSIS

Aggravating Factors Kraken failed to exercise due caution or care for its sanctions compliance obligations when, knowing it had customers worldwide, it applied its geolocation controls only at the time of onboarding and not with respect to subsequent transactional activity, despite having reason to know based on available IP address information that transactions appear to have been conducted from Iran.

Mitigating Factors voluntarily self-disclosed and cooperated with OFAC never received a penalty in 5 years. undertook significant measures sanctions compliance program

BIBLIOGRAPHY

https://en.wikipedia.org/wiki/Office_of_Foreign_Assets_Control

https://www.investopedia.com/tech/what- kraken/#:~:text=Kraken%20is%20a%20cryptocurrency%20exchange,euros%2C%20and

%20the%20Japanese%20yen.

https://www.usesignhouse.com/blog/kraken-stats (PDF Provided)

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