Even though sanctions were in place, Binance helped Iranian companies trade $8 billion.

LONDON – Blockchain data show that the crypto giant Binance has processed Iranian transactions worth $8 billion since 2018. This is in spite of U.S. sanctions that were meant to cut Iran off from the global financial system.

A major U.S. blockchain researcher, Chainalysis, looked at the data and found that almost all of the money, about $7.8 billion, moved between Binance and Nobitex, Iran’s largest cryptocurrency exchange. On its website, Nobitex tells people how to avoid sanctions.

Three-quarters of the Iranian money that went through Binance was in a cryptocurrency called Tron, which isn’t very well known and lets users hide their identities. In a blog post from last year, Nobitex told clients to use Tron, a mid-tier token, to trade anonymously without “putting assets at risk due to sanctions.”

Related: The CEO of Binance says that the digital currencies of central banks do not pose a threat to crypto.

No one has talked about how big Binance’s crypto flows from Iran are or that they are still happening.

The new findings come as the U.S. Justice Department looks into whether Binance, which has more than 120 million users and is the leader in the $1 trillion crypto industry, broke any rules about money laundering. Lawyers and people who study trade sanctions said that the transactions put the company at risk of breaking U.S. rules against doing business with Iran.

In July, Reuters reported that Binance was still working with clients in Iran and that the company knew how popular the exchange was in the Islamic Republic. It was part of a series of investigations by Reuters into Binance’s troubled past with following financial rules. The same day that article came out, Binance said in a blog post that it follows international sanctions against Iran and doesn’t let anyone from Iran use its platform. Changpeng Zhao, who started the exchange and is worth a billion dollars, tweeted, “Binance banned Iranian users after sanctions.” “7 got missed or found a way around it, but they were banned later anyway.”

Reuters found new transactions that Binance didn’t know about. When asked about them in detail, Binance didn’t answer. In a statement, spokesperson Patrick Hillmann said, “Binance.com is not a U.S. company, unlike other platforms that work with these same U.S.-sanctioned entities.” But we have taken steps to limit the amount of time we spend in the Iranian market “working with business partners and tools from within the company.”

Binance won’t say where its Binance.com exchange is located or who is behind it.

When asked questions for this article, Nobitex didn’t answer. Nor did Justin Sun, who started the Tron Network and is based in the British Virgin Islands.

In August 2021, Binance said that customers would no longer be able to use its services or open accounts without proving who they were. But since then, the exchange has handled trades directly from Nobitex and other Iranian exchanges worth almost $1.05 billion, according to data from Chainalysis that goes up to November of this year. Since Zhao’s tweet in July, around $80 million has been traded between Iran and Binance.

Hillmann said in a statement from Binance that the company needs full “Know Your Customer” checks done on all users, and people from Iran can’t open or keep an account. As we learn about new risks and possible exposures, we are always updating our processes and technology. As a result of these efforts, which include monitoring transactions in real time with the help of outside vendors, Binance’s exposure to entities with ties to Iran has gone down by a factor of ten between June 2021 and November 2022.

Reuters looked at the data and found that since 2018, about $2.95 billion worth of cryptocurrency has moved directly between Iranian exchanges and Binance.

The data also show that another $5 billion in cryptocurrency moved between Iranian exchanges and Binance through several layers of middlemen. Regulators say that such “indirect” flows should be a red flag for crypto exchanges, a sign that someone might be trying to launder money or get around sanctions. When people who use crypto want to hide their tracks, they often use complicated methods to make long chains of crypto transfers.

Nobitex tells its 4 million customers on its website to “maintain security” by not “directly transferring” crypto between Iranian and foreign crypto platforms.

In June, Binance spokeswoman Hillmann told Reuters that the exchange was indirectly exposed to illegal funds. She said, “It’s not important where the funds come from because cryptographic deposits can’t be blocked.” “What’s important is what we do with the funds after they are deposited.” He said that Binance uses transaction monitoring and risk assessments to “make sure that any illegal funds are tracked, frozen, recovered, and/or returned to their rightful owner.”

Aside from the Tron token, the rest of Iran’s transactions were made with the major cryptocurrencies bitcoin, ether, tether, and XRP, as well as a smaller token called litecoin.

Industry data shows that Binance is the biggest place to trade Tron. Some other big exchanges, like Coinbase and Gemini, which are regulated by the U.S. government, do not list the token.

Until recently, most people who track cryptocurrencies didn’t pay much attention to Tron. According to an email Chainalysis sent to a client, the market leader, Chainalysis, which is used by U.S. government agencies, only started fully supporting the tracing of Tron this May.

Since April 2020, when the first Tron flows were recorded, the Tron dataset shows more than 1.15 million direct transfers between Binance and Nobitex. Wallet addresses and a unique number for each transaction are part of the data.

Three companies with access to Chainalysis’s Reactor investigation software gave Reuters the Tron numbers and other datasets about other crypto tokens. Reuters checked each company’s numbers against each other. Some of the numbers on direct transfers were also confirmed by a fourth company, which used a separate dataset made with different software to confirm some of the numbers.

Here, Reuters shares information about direct transactions since August 20, 2021, which add up to about $1 billion.

The amount of Iranian transactions that go through Binance is much higher than any other exchange, according to the data. Since 2018, the next most popular exchange for Nobitex users after Binance was KuCoin, which is based in the Seychelles and handled $820 million in direct and indirect trades.

KuCoin and six other Iranian exchanges in the dataset, such as CoinNik Market, Iranicard, Rabex, Wallex, Sarmayex, and Tether Land, did not respond to requests for comment.

SANCTIONS RISK

Since its start in 2017, Binance has grown by leaps and bounds. Last month, the company went beyond crypto by putting $500 million into Tesla CEO Elon Musk’s plan to buy out Twitter.

The U.S. Justice Department is looking into whether Binance broke any U.S. laws against money laundering. As part of the case, which has been going on since 2018, the department is also looking into whether Binance broke any criminal sanctions with Iran, according to three people who know about the investigation. Late in 2020, the department asked Binance for records about its compliance programme, including any papers about the transfer of cryptocurrency funds to people or businesses in countries like Iran.

The Justice Department said it had nothing to say.

In 2018, the U.S. government put back in place sanctions on Iran that had been lifted three years earlier as part of a deal Iran made with the rest of the world about its nuclear program. Since 1979, the West and the UN have put sanctions on Tehran because of its nuclear programme, as well as what they say are human rights violations and support for terrorism.

Six lawyers and sanctions experts said that the Iranian transactions reported by Reuters put Binance at risk of “secondary” U.S. sanctions. These sanctions are meant to stop non-U.S. companies from doing business with sanctioned entities or helping Iranians get around the American trade embargo. With secondary sanctions, a company might not be able to use the U.S. financial system.

Lawyers and experts said that Binance could also face direct “primary” sanctions if the company has what the U.S. Treasury Department calls a “nexus to the United States.” They said that these links can be made through U.S.-based companies, transactions that go through the U.S. financial system, or the use of the dollar. When asked for a comment, Treasury didn’t give one.

In 2019, Britain’s Standard Chartered agreed to pay the U.S. government almost $930 million for breaking criminal sanctions. This included moving about $240 million for Iranian customers through U.S. financial institutions. Standard Chartered took responsibility for breaking the rules. In 2014, the French bank BNP Paribas agreed to plead guilty and pay $8.9 billion for breaking U.S. sanctions against countries like Iran. Both banks promised to make their controls better.

Binance says that it does not work with people in the US. Instead, American customers are sent to a different exchange called Binance.US, which is run by a U.S. company that has been registered with the Treasury as a money-service business since 2019.

Zhao, the CEO of Binance, has said that Binance.US is a “completely separate entity.” In October, Reuters said that he really did run the U.S. exchange and tell its managers what to do from outside the country. In a message to executives in 2018, a Binance advisor called the U.S. business a “de facto subsidiary.”

Zhao said again in a blog post after that article that Binance.US “runs separately from Binance.com.”

The main Binance exchange was used for the vast majority of the $8 billion in Iranian cryptocurrency transactions that Reuters found. Chainalysis data show that Binance.US also processed $1.5 million worth of cryptocurrency trades from the Iranian exchanges Nobitex, Wallex, and Tether Land.

If a U.S. company breaks the Iran sanctions, they could be fined up to $1 million per violation. People who do this can go to jail for up to 20 years. In October, the Treasury fined Seattle-based cryptocurrency exchange Bittrex $24 million for breaking sanctions against Iran and other countries by processing cryptocurrency transactions worth more than $260 million. At the time, Bittrex said it was “pleased to have fully resolved” the problem.

Related: Binance’s CEO says that Google is still promoting sites that steal cryptocurrency.

Binance was called for this article.

A US spokesperson said that Reuters’s numbers for its transactions with the Iranian exchanges were not correct and that including “direct and indirect transactional data from Chainalysis both confuses and inflates the volume you cite.” The spokesperson didn’t offer a different number.

Binance.US “follows all U.S. rules that apply to digital asset exchanges” and only lets entities trade who have passed a “rigorous screening process,” according to a spokesperson.

The United States hasn’t banned Nobitex or any of the other crypto exchanges in Iran. Reuters did not find any proof that people, companies, or organisations that were on a list of banned Iranians used Binance or Binance. US.

“THE BEST OPTION”

The biggest Iranian exchange, Nobitex, opened in 2017. Amirhosein Rad, the company’s co-founder and CEO, has a Ph.D. in philosophy and chemical engineering from Iran’s Sharif University of Technology, as his LinkedIn profile shows. Rad didn’t say anything about this story.

On its LinkedIn page from earlier this year, Nobitex said that its goal was to let Iranians invest in crypto despite “the shadow of sanctions.” As sanctions have made it harder for Iran to do business with the rest of the world, crypto has become more popular there as a way to buy and sell goods across borders. The exchange said it connects 3.5 million Iranians to the world of cryptocurrencies in a safe way.

In its annual report for 2021, Nobitex said that it handles 70% of all cryptocurrency transactions in Iran. The exchange has suggested to its clients, as recently as this year, that they use Binance in a number of posts on its website and social media channels.

Chainalysis data shows that people who used Nobitex started moving bitcoin through Binance in April 2018.

In a trading guide that was first posted on Nobitex’s website in 2019 and was updated in October of this year, Nobitex told users to open accounts to convert their Iranian rials into crypto and then send the crypto to the “most reliable” foreign exchange, such as Binance. Later posts in 2020 said, “For us Iranians, Binance is still the best option” and that Binance “causes fewer problems for Iranian users.”

Due to the risk of U.S. sanctions, Nobitex’s public terms of service tell customers to avoid “direct transfers” of crypto from Nobitex to Binance and instead create multiple digital wallets to move funds in stages.

Chainalysis data showed that the number of Tron trades between Nobitex and Binance shot up in August 2020.

In the same month, Sun, who created Tron, posted on Twitter that the digital coin had a new feature that let traders hide their identities. Sun wrote that the zk-SNARK feature would provide “the strongest privacy protection in the industry” for user data.

In a Justice Department journal from last year, it was written that this feature makes it possible to create “anonymity-enhanced cryptocurrencies” that attract criminals “like sharks to chum” because they “seek privacy to hide their behaviour.”

Nobitex told people who wanted to buy Tron that they should set up digital wallets with Binance because it has “high security.” In July 2021, a Nobitex blog post said that zk-SNARK was the key to “hiding” the people who send and receive crypto.

The data shows that Nobitex customers could still use Binance to trade Tron and other crypto tokens after August 20, 2021, when Binance tightened its checks on clients. It showed that between that time and November of this year, Binance handled direct transactions from Nobitex worth more than $1 billion. This was much more than any other international exchange. The data show that in October of this year, $20 million in Tron moved directly between Binance and Nobitex.

A Chainalysis report from September said that Iranians who had been put on a list by the U.S. Treasury for cyberattacks and ransomware activity had used Nobitex. Chainalysis says that between 2015 and 2022, more than $230,000 in bitcoin ransomware funds were sent to the digital wallets of Iranians who were on the sanctions list. Most of the cryptocurrency was sent to Nobitex.

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The Treasury said in the same month that all of the Iranians who had sanctions put on them were part of the powerful Islamic Revolutionary Guard Corps, which runs a business empire and elite military and intelligence forces in Iran. When asked for a comment, the Iranian government did not give one. The Iranian Ministry of Foreign Affairs said that U.S. sanctions were “unfair, illegal, and cruel.”