Shuttered ShapeShift Crypto Exchange Settles Sanctions Violations for $750K

Defunct crypto exchange ShapeShift has agreed to pay $750,000 to settle violations of the Office of Foreign Assets Control, the U.S. Department of the Treasury said Tuesday. 

The government department said that the exchange—founded by early crypto entrepreneur Erik Voorhees—took money from users based in sanctioned countries Cuba, Iran, Sudan, and Syria. 

Feds alleged that ShapeShift had "no sanctions compliance program in place to screen users or transactions for a nexus to sanctioned jurisdictions," and processed over $12.5 million in crypto transactions by users from sanctioned countries between December 2016 and October 2018. 

"Only after ShapeShift received an administrative subpoena from OFAC did it adopt a sanctions compliance program," the Treasury Department's announcement read. 

"ShapeShift had reason to know that such users were located in sanctioned jurisdictions, including on the basis of IP address data," the Treasury Department continued, adding that the exchange "conveyed economic benefit to persons in several jurisdictions subject to OFAC sanctions and thereby harmed the integrity of multiple OFAC sanctions programs."

It said that the fine was small as ShapeShift is a shuttered exchange with limited assets. ShapeShift closed in 2021. 

The exchange—founded in 2014, incorporated in Switzerland, and run out of Denver, Colorado before it shut down—allowed users to swap digital coins and tokens without having to sign up with typical know-your-customer or KYC details, such as addresses or bank details. Clients could therefore trade cryptocurrencies like Bitcoin and Ethereum with a degree of anonymity. 

ShapeShift received early funding from early crypto bigwigs like Roger "Bitcoin Jesus" Ver and Digital Currency Group CEO Barry Silbert. 

But the exchange ran into trouble when the Securities and Exchange Commission started investigating the platform for not registering as a broker or exchange. 

ShapeShift last year agreed to a cease-and-desist order and a $275,000 fine to settle allegations from the SEC.