Blockchain data reveals that cryptocurrency firm Binance has handled $8 billion worth of Iranian transactions since 2018 despite U.S. sanctions aimed at cutting off Iran from the world banking system.
According to an analysis of data from renowned U.S. blockchain researcher Chainalysis, almost all the money—roughly $7.8 billion—flowed between Binance and Iran’s biggest cryptocurrency exchange, Nobitex. On its website, Nobitex provides instructions on how to avoid punishment.
Three-quarters of the Iranian assets that went through Binance were invested in Tron, a relatively obscure cryptocurrency that allows users to hide their identities. A mid-tier coin called Tron can be used to trade anonymously without “endangering assets owing to penalties,” according to a blog post published by Nobitex last year.
It has never been previously published on the scope of Binance’s Iranian crypto flows, let alone the fact that they are still going strong.
The new information is being released at the same time that the US Justice Department is looking into suspected money-laundering breaches at Binance, the market leader in the $1 trillion cryptocurrency sector with more than 120 million users. According to attorneys and trade sanctions specialists, the company’s activities put it at risk of violating US restrictions on doing business with Iran.
Reports came in July that Binance was still accepting customers from Iran and that the business was aware of the exchange’s popularity in the Islamic Republic. A number of investigations on Binance’s problematic past with finance regulatory compliance led to this one. Binance stated in a blog post the day after that report was published that it abides by international sanctions regulations on Iran and denies access to the platform to anyone residing there. Changpeng Zhao, the billionaire creator of the exchange, wrote on Twitter: “Binance banned Iranian users following sanctions, 7 got missing/found a workaround, and they were banned later nevertheless.”
Regarding the fresh transactions discovered by reporters, Binance chose not to respond. Patrick Hillmann, a representative, stated in a statement: “Contrary to other platforms that have exposure to the same U.S. sanctioned businesses, Binance.com is not a U.S. firm. We have, however, taken aggressive measures to reduce our exposure to the Iranian market by “utilizing internal resources and partners in the business”.
Binance rejects to provide information regarding the location or organization that operates its Binance.com exchange.
Nobitex declined to answer inquiries for this article. Additionally, neither did the British Virgin Islands-based Tron Network nor its creator Justin Sun.
Binance said that clients would no longer be able to register for accounts or use its services without identification starting in August 2021. But as of November of this year, according to Chainalysis statistics, the exchange had handled close to $1.05 billion in trades straight from Nobitex and other Iranian exchanges. Iran-related trades on Binance have totaled about $80 million since Zhao’s post in July.
We are constantly updating our processes and technology as we learn about new risks and potential exposures, including real-time transaction monitoring in coordination with external vendors, which will reduce Binance’s exposure to Iran between June 2021 and November 2022, according to Hillmann in the Binance statement. Residents of Iran are not permitted to open or maintain an account.
According to the data examined by reporters, since 2018, roughly $2.95 billion in cryptocurrency has moved directly between Iranian exchanges and Binance.
The data also show that an additional $5 billion in cryptocurrency was transferred between Iranian markets and Binance via multiple layers of middlemen. According to regulators, these “indirect” transfers should raise a warning for crypto exchanges as they could be a sign of money laundering and sanction evasion. Cryptocurrency users who want to hide their footprints frequently employ advanced methods to build intricate webs of cryptographic transfers.
On its website, Nobitex advises its 4 million users to “maintain security” by avoiding “the direct transfer” of cryptocurrency between Iranian and foreign crypto platforms.
What’s important to note is what we do after the funds are deposited, not where they come from because crypto deposits cannot be blocked, according to Binance spokesperson Hillmann, who told reporters in June that the exchange uses transaction monitoring and risk assessments to “ensure that any illegal funds are tracked, frozen, recovered, and/or returned to their rightful owner.”
The remaining Iranian transactions, besides the Tron token, were made in the well-known cryptocurrencies bitcoin, ether, tether, XRP, and a lesser token called litecoin.
Industry research shows that Binance is the largest market for trading Tron. The coin is not included on certain other significant exchanges, including the US-regulated Coinbase and Gemini.
Tron has largely escaped the attention of cryptocurrency trackers up until lately. According to an email Chainalysis delivered to a client, the market leader Chainalysis, used by U.S. government agencies, only started offering full support for the tracing of Tron this May.
Since April 2020, when the first Tron flows were tracked, the Tron dataset has information on more than 1.15 million direct transfers between Binance and Nobitex. The information includes wallet addresses and a specific transaction-specific identification number.
Three companies with access to Chainalysis’ Reactor research software provided reporters with the Tron information as well as additional datasets covering the other crypto coins. Each company’s numbers were double-checked. Based on a different dataset created with different software, a fourth company also verified some of the direct transfer statistics.
RISK OF SANCTIONS
Since its 2017 inception, Binance has experienced rapid growth. Last month, the business broadened its focus beyond cryptocurrencies by contributing $500 million to Elon Musk, the CEO of Tesla, to acquire Twitter.
Whether Binance broke any anti-money laundering laws in the United States is the major subject of the Justice Department’s inquiry. According to three people with knowledge of the investigation, the department is also looking into Binance as part of the case, which has been ongoing since 2018, for potential criminal sanctions violations related to Iran. In late January 2020, the government requested that Binance provide information regarding its compliance program, particularly any documentation pertaining to the movement of cryptocurrency cash for individuals or businesses in nations like Iran.
Justice Department officials opted not to comment.
In accordance with Iran’s nuclear agreement with international powers, the U.S. government eased sanctions on Iran for three years before reinstating them in 2018. Since 1979, sanctions imposed by the West and the UN on Tehran for its nuclear program, as well as for alleged abuses of human rights and support for terrorism, have been in place.
The documented Iranian transactions according to six lawyers and sanctions specialists, placed Binance in danger of “secondary” U.S. penalties meant to stop non-U.S. companies from transacting with entities that are under sanctions or assisting Iranians in evading the American trade ban. A company’s access to the American financial system may be severely restricted by secondary sanctions.
If Binance possesses what the U.S. considers to be “primary” assets, the firm may also be subject to direct sanctions. The lawyers and analysts claimed that the Treasury Department refers to this as a “nexus to the United States.” They stated that these connections may be made with any U.S.-incorporated businesses, transactions carried out using the dollar or the American financial system, or both. An inquiry for feedback from Treasury received no response.
The British bank Standard Chartered agreed to pay over $930 million to American authorities in 2019 for breaking criminal sanctions, which included routing around $240 million through American financial institutions for Iranian clients. Standard Chartered admitted guilt about the transgressions. In 2014, the French bank BNP Paribas consented to pay $8.9 billion and enter a guilty plea to breaking U.S. sanctions on nations like Iran. Both banks vowed to improve their controls.
According to Binance, it does not accept clients from the US. Instead, American customers are routed to a different exchange called Binance.US, which is operated by a U.S. corporation that has been registered with the Treasury as a money-service business since 2019.
Binance.US has been referred to as a “totally separate entity” by Binance CEO Zhao. In October, it was revealed that he actually owned the American exchange and oversaw its operations from afar. In a note to executives in 2018, a Binance consultant referred to the U.S. operation as a “de facto subsidiary.”
Zhao emphasized that Binance.US “operates independently from Binance.com” in a blog post that was published following that report.
The primary Binance exchange was engaged, in the vast majority of the $8 billion in Iranian cryptocurrency transactions that were discovered. However, according to the Chainalysis data, Binance.US also handled $1.5 million worth of cryptocurrency transactions from the Iranian exchanges Nobitex, Wallex, and Tether Land.
The sanctions against Iran can result in criminal penalties of up to $1 million per violation for American organizations. Up to 20 years in prison are possible for those who are involved. The Treasury fined Seattle-based cryptocurrency exchange Bittrex $24 million in October for breaking the sanctions against Iran and other nations by processing transactions totaling more than $260 million in cryptocurrencies. At the time, Bittrex expressed their “pleasure to have totally handled” the situation.
Binance was contacted for this article. Estimates for its transactions with Iranian exchanges were deemed inaccurate by a US representative, who also claimed that combining “direct as well as indirect transactional data from Chainalysis both conflates and inflates the volume you quote.” The representative didn’t offer a substitute sum.
According to the spokesman, Binance.US “adheres to all applicable U.S. rules regulating digital asset exchanges” and only allows trade by businesses that have gone through a “rigorous screening procedure.”
Nobitex and the other Iranian cryptocurrency exchanges are not subject to US sanctions. There is no proof, that sanctioned Iranian people, businesses, or organizations used Binance or Binance. US.
THE BEST CHOICE
The biggest Iranian exchange, Nobitex, debuted that year. According to his LinkedIn page, the company’s co-founder and CEO, Amirhosein Rad, earned a doctorate in chemical engineering and philosophy from the Iran’s Sharif University of Technology. For this article, Rad opted not to comment.
Nobitex wants to make it possible for Iranians to invest in cryptocurrencies despite “the shadow of sanctions,” as stated on its LinkedIn page earlier this year. As sanctions have hampered Iran’s capacity to conduct business with the outside world, cryptocurrency has become more and more common there for international trade. According to the exchange, it acts as a “secure bridge between the world of cryptocurrencies and 3.5 million Iranians.”
In its 2021 annual report, Nobitex claimed to handle 70% of all cryptocurrency transactions in Iran. As recently as this year, the exchange encouraged users to utilize Binance in a number of posts on its website and social media accounts.
According to Chainalysis statistics, Nobitex users started transferring bitcoin through Binance in April 2018.
Nobitex advised users to open accounts to convert their Iranian rials into cryptocurrencies and then make transfers to a foreign exchange like Binance, which it called the “most reliable,” in a trading guide that was first published in 2019 and updated this October. Subsequent posts in 2020 stated that “for us Iranians, Binance is still the best option” and that Binance “causes fewer problems for Iranian users.”
Nobitex’s public conditions of use advise consumers to avoid the “direct transfer” of cryptocurrency from Nobitex to Binance and instead construct numerous digital wallets to move funds in different stages, due to the danger posed by U.S. sanctions.
According to Chainalysis data, the number of Tron transactions between Nobitex and Binance increased starting in August 2020.
The founder of Tron, Sun, announced on Twitter the same month that the digital coin had enabled a new function that allowed traders to conceal their identities. The function, dubbed zk-SNARK, will “secure user data with the greatest privacy protection in the market,” according to Sun.
According to a piece last year that appeared in a journal of the Justice Department, the feature enables the creation of “anonymity enhanced cryptocurrencies” that draw criminals “like sharks to chum” as they “seek out seclusion to disguise their activities.”
Due to Tron’s “excellent security,” Nobitex advised consumers to open digital wallets with Binance in order to purchase it. Zk-SNARK, according to a July 2021 Nobitex blog article, is essential for keeping crypto senders and recipients “secret.”
After Binance tightened its client screening on August 20, 2021, Nobitex customers were still able to utilize Binance to trade Tron and other crypto tokens, according to the data. Between that time and November of this year, Binance conducted direct transactions from Nobitex worth over $1 billion, greatly surpassing any other foreign exchange, the data showed. The data reveals that as late as this October, $20 million in Tron moved straight between Binance and Nobitex.
Nobitex has been utilized by Iranians who have been subject to U.S. Treasury sanctions for engaging in cyberattacks and ransomware operations, according to a Chainalysis analysis from September. According to Chainalysis, over $230,000 in bitcoin ransomware proceeds were transmitted to sanction Iranians’ digital accounts between 2015 and 2022, with the majority of the cryptocurrency going to Nobitex.
The Islamic Revolutionary Guard Corps a potent group that governs an economic empire as well as elite armed and intelligence units in Iran, is reported to be linked with all of the Iranians who were subject to sanctions, according to the Treasury’s statement from the same month. An inquiry for comments was not answered by Iranian authorities. The U.S. sanctions have been dubbed “unilateral, illegal, and brutal” by the Iranian Foreign Ministry.
