On February 18, 2021, the US Department of the Treasury’s Office of Foreign Assets control (OFAC) announced a $507,375 settlement with BitPay, Inc. (BitPay). This civil settlement resolved apparent violations of multiple sanctions programs related to digital currency transactions, and is the second OFAC enforcement case brought against a business in the blockchain industry. This case follows OFAC’s December 2020 civil enforcement action against another blockchain industry company, BitGo, Inc. (BitGo), for alleged violations of multiple US sanctions programs related to digital currency transactions. See our prior blog post on the BitGo action here.
BitPay, based in Atlanta, Georgia, offers a payment processing solution for merchants to accept digital currency as payment for goods and services. The apparent sanctions violations relate to digital currency transactions on the BitPay platform between individuals located in Cuba, North Korea, Iran, Sudan, Syria, and the Crimea region of Ukraine (annexed by Russia) and merchants in the United States and elsewhere. OFAC acknowledged that BitPay screened its customers, the merchants, against US sanctions lists, but stated that BitPay had reason to know that purchasers dealing with the merchants were located in comprehensively sanctioned jurisdictions because the company had location information, including Internet Protocol (IP) address data, about those persons. This case was not voluntarily disclosed, but OFAC found that the violations were not egregious.
According to OFAC, BitPay allowed persons in comprehensively sanctioned jurisdictions to conduct approximately $129,000 worth of digital currency transactions with BitPay’s merchant customers. As described in OFAC’s enforcement release, between approximately June 10, 2013, and September 16, 2018, BitPay processed 2,102 transactions from individuals with IP addresses located in the sanctioned jurisdictions. The transactions related to BitPay’s payment processing service. BitPay allegedly received digital currency payments on behalf of its merchant customers from those merchants’ buyers, who were located in sanctioned jurisdictions. BitPay then converted the digital currency into fiat, and then relayed that currency to its merchant customers.