Binance Served Crypto Traders in Iran for Years Despite US Sanctions

In accordance with the Iran nuclear agreement with major international powers, the United States resumed sanctions against Iran in 2018. These penalties had been lifted three years before. In November, Binance warned Iranian merchants that it would no longer support them and instructed them to delete their accounts.

Seven dealers, though, claimed they avoided the restriction in interviews with Reuters. The traders said that they kept using their Binance accounts up until September of last year, losing access only when the exchange intensified its anti-money laundering procedures a month earlier. Customers may trade before that by signing up with simply an email address.

Asal Alizade, a dealer in Tehran who claimed to have used the exchange for two years till September 2021, stated that although there were some alternatives, none of them could compare to Binance in terms of quality. We everyone utilized it since identification verification was unnecessary.

Eleven more Iranians outside of those Reuters questioned claimed on their LinkedIn accounts to have traded cryptocurrency at Binance as well following the 2018 ban. They all remained silent when questioned.

The business was aware of the exchange's popularity in Iran. According to 10 texts senior workers had with one another in 2019 and 2020, which are disclosed here for the first time, they were aware of the exchange's swelling ranks of Iranian users and made jokes about them. In response to information demonstrating the popularity of Binance on Instagram in Iran, one of them remarked, "IRAN BOYS."

Iran-related inquiries from Reuters were unanswered by Binance. Binance said in a blog post from March that it "follows international sanction guidelines completely" and had put together a "global compliance task group, comprising world-renowned sanctions and law enforcement professionals" in response to Western sanctions on Russia. Binance claimed to utilize "banking grade technologies" to block access to sanctioned individuals or organizations on its platform.

A request for comment was not answered by the Iranian representation to the UN in New York.

According to seven attorneys and sanctions specialists who spoke to Reuters, American authorities may be interested in the Iranian activity on the exchange.

The Cayman Islands-based parent company of Binance claims it does not have a single headquarters. The organization behind its primary Binance.com exchange, which does not accept consumers from the United States, is not disclosed. Instead, U.S. customers are routed to Binance.US, a different exchange that is ultimately under the supervision of Changpeng Zhao, the founder and CEO of Binance, according to a 2020 regulatory filing.

According to lawyers, this arrangement shields Binance from the direct U.S. sanctions that prevent American companies from doing business in Iran. This is due to the fact that the traders in Iran utilized Binance's primary exchange, which is a non-American business. However, Binance is susceptible to so-called secondary sanctions, which are meant to stop foreign companies from doing business with enterprises that are subject to sanctions or assisting Iranians in evading the U.S. trade embargo. In addition to harming a company's image, secondary penalties may prevent it from accessing the American financial system.

If sanctioned parties transacted on the platform and whether Iranian customers avoided the U.S. trade embargo as a consequence of their transactions would determine Binance's vulnerability, according to four attorneys. Erich Ferrari, principal attorney at the Washington, D.C., law firm Ferrari & Associates, warned 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 onboarding those types of users."

There is no proof, according to Reuters, that sanctioned people utilized Binance.

When asked about Iranian merchants utilizing Binance, a U.S. Treasury representative chose not to respond.

According to Reuters' January story, which was based on interviews with former senior workers, internal mails, and contact with national authorities, Binance maintained lax compliance checks on its users up until last year despite concerns expressed by several top business executives. In response, the exchange said that it was raising industry standards. The most recent investigation from Reuters demonstrates for the first time how Binance's compliance program's flaws enabled Iranian dealers to transact on the exchange.

With 120 million users and a variety of digital currencies, derivatives, and non-fungible tokens available to them, Binance controls the $950 billion cryptocurrency market and processes monthly deals worth trillions of dollars. The conversation is becoming more widely accepted. This year, its billionaire founder Zhao, often known as CZ, expanded his sphere of influence into more established industries by committing $500 million to Tesla CEO Elon Musk's proposed acquisition of Twitter. Later, Musk said that he was leaving the agreement. Cristiano Ronaldo, a soccer player from Portugal, was recruited by Binance last month to promote its NFT company.