US registers first criminal cryptocurrency sanctions case

In a nine-page opinion, US Magistrate Judge Zia M. Faruqui of Washington, D.C., explained why he approved a Justice Department criminal complaint against an American citizen accused of transmitting more than USD 10 million worth of Bitcoin to a virtual currency exchange in one of a handful of countries comprehensively sanctioned by the US government: Cuba, Iran, North Korea, Syria, or Russia.

In the ruling, the judge called cryptocurrency’s reputation for providing anonymity to users a myth. He added that while some legal experts argue that virtual moneys such as Bitcoin, Ethereum, or Tether are not subject to US sanctions laws because they are created and move outside the traditional financial system, recent action taken by the Treasury Department’s Office of Foreign Assets Control require federal courts to find otherwise.

In the opinion, the judge wrote that he adopted guidance issued in October 2021 by OFAC, which stated that sanctions regulations apply equally to transactions involving virtual currencies as those involving the US dollar or other traditional fiat currencies.

The defendant was not named in the opinion and the underlying case remains sealed – as often happens in an ongoing investigation – after the court, in consultation with prosecutors, withheld information that would identify the subject or witnesses.