Crypto exchange Binance cheated on Iran sanctions for years

Already banned since 2018
Crypto exchange cheated by Iran sanctions for years

7/11/2022 6:57 PM

Cryptocurrency exchange Binance is headquartered in the Cayman Islands, and trades can be conducted all over the world. According to the company, it also complies with international sanctions. But in Iran, users are said to have circumvented the US trade ban by using the platform.

According to Reuters information, the world’s largest cryptocurrency exchange Binance has been trading clients in Iran for years despite US sanctions. In interviews with Reuters news agency, seven traders said they circumvented the ban. As of September, they were still using their Binance accounts. Their access was only lost when the cryptocurrency exchange tightened anti-money laundering measures. Up to this point, according to traders, clients can trade on the platform simply by registering with an email address.

Four years ago, the United States unilaterally withdrew from the 2015 nuclear deal with Iran under then-President Donald Trump. As a result, Iran is no longer in compliance with all of the terms of the agreement. The nuclear deal aims to prevent Iran from building nuclear weapons. Iran has long denied such intentions.

Binance is keeping an eye out

In November 2018, Binance notified traders in Iran that the services were no longer available to them. So they should close their accounts. “There were some alternatives, but none of them were as good as Binance,” said Asal Alizadeh, a trader in Tehran, of the cryptocurrency exchange. I used the exchange for two years until September 2021. “No identity verification required, so we used all of them.”

Poriya Fattohi, who lives in Tehran and says he runs a hedge fund, said he used the Binance platform from 2017 to September last year. Binance has persuaded the Iranians because of its simple KYC controls. Traders can open an account simply by providing an email address. Eleven other people shared on their LinkedIn profiles that they too were still trading crypto assets after 2018. However, none of the people responded to queries.

The old employees learned of the exchange’s popularity in Iran, according to emails they sent to each other in 2019 and 2020. The company itself has kept a low profile: Binance has not answered questions about Iran. In a March blog post published in response to Western sanctions against Russia, the company said, among other things, that it strictly adheres to international sanctions rules. The Iranian mission to the United Nations in New York did not respond to a request for comment.

Danger with secondary penalties

The cryptocurrency exchange, whose holding company is based in the Cayman Islands, says it does not have a corporate headquarters. No details were given about the company behind the main trading platform Binance.com, which does not accept clients from the United States. Instead, US customers are referred to a separate platform, Binance.US, which according to a mandatory announcement from 2020, is controlled by Binance founder and CEO Changpeng Zhao.

In the lawyers’ view, this corporate structure means that Binance is protected from direct US sanctions that prevent US companies from doing business in Iran. Because traders in Iran use the main exchange Binance, which is not an American company. However, according to the lawyers, Binance risks so-called secondary penalties. These are intended to prevent foreign companies from doing business with sanctioned companies or help Iranians circumvent the US trade embargo. These sanctions can not only damage the company’s reputation, but also cause it to lose access to the US financial system.