Binance is in Hot Water Over Iran
By Lesia Dubenko 1959 13 Jul 2022
The world’s largest crypto exchange is making headlines, - yet they are hardly what it expects them to be.
According to a new investigation by Reuters, the exchange has effectively continued to serve clients in Iran, ignoring U.S. sanctions as well as its ban on doing business there.
The story dates to 2018 when the U.S. reimposed sanctions on Iran, which prompted Binance to tell its clients that its operations in the country would be ceased. By 2019, the exchange had added Iran to the “Hard 5 Sanctioned” list that also features Cuba, Syria, North Korea, and Crimea.
Yet, the talk turned out to be void as evidence shows that multiple users continued to trade on the platform, praising it for weak background checks. Reuters identified seven traders who said they skirted the ban and kept using the exchange until Sep.2021 after Binance had tightened its AML checks.
Pooria Fotoohi, also from Tehran, also admitted he used the platform from 2017 until September 2021, as Binance only asked them to provide an email address.
Teaching how to skirt bans
Binance also acquired new customers as it taught them how to use VPNs. In 2019, the platform’s CEO Changpeng Zhao, Binance's CEO, tweeted in June 2019 that VPNs were "a necessity, not optional." Although he deleted the tweet, in July 2020, Binance published on its website a "Beginners' Guide to VPNs." One of its tips: "You might want to use a VPN to access sites that are blocked in your country."
Among those using VPN is Mehdi Qaderi, a business development worker, who traded around $4,000 worth of crypto on Binance in the year to August 2021 thanks to it. "All of the Iranians were using it.”
Per Reuters, Binance was well aware of what was going on in Iran. However, the popularity of the platform, which translated into profit, eclipsed the need to abide by the rules. According to the agency, one of Binance’s employees wrote the comment "IRAN BOYS," in response to data showing the popularity of Binance on Instagram in Iran.
It also seems that Zhao knew that crypto users were circumventing Binance's controls. He told interviewers in November 2020 that "users do find intelligent ways to get around our block sometimes and we just have to be smarter about the way we block."
It is yet to be determined, however, if Binance will be held accountable for its actions given that the exchange effectively let Iranians skirt the sanctions. Lawyers say that it depends on whether Iranian clients dodged the U.S. trade embargo as a result of their transactions.
Previously, Binance was accused of becoming a hotbed of crime and leaking sensitive data to the Russian authorities.