Crypto Software Firm Under OFAC Scrutiny for Possible Sanctions Violations
A U.S. digital assets company and a European aerospace firm recently disclosed in financial statements that they're under investigation for possible violations of sanctions or export control laws, while an American entertainment company revealed it submitted a sanctions disclosure to the U.S. government.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
Exodus Movement, a cryptocurrency trading software firm, said the Office of Foreign Assets Control plans to take enforcement action against it for possible violations of U.S. sanctions, including against Iran.
The company received a pre-penalty notice from OFAC in June saying that the agency could soon “impose a civil monetary penalty for alleged violations of U.S. sanctions laws,” according to an SEC filing last month. “If we are found to be in violation of U.S. economic sanction laws (which may occur after we submit a response to the Pre-Penalty Notice, OFAC reviews that submission and then makes a final determination), it could result in fines and penalties.”
Exodus has submitted disclosures and subpoena responses to OFAC as far back as 2018 involving the company’s potential sanctions violations related to Iran, North Korea and other countries (see 2403010056 and 2305260012). One disclosure involved free downloads of the company’s “un-hosted and non-custodial software wallet for digital assets” in certain embargoed countries, which the company said may have included Cuba, Iran and Syria.
In its most recent filing, the company said it may have “allowed our software to be downloaded by individuals or entities potentially located in countries or territories subject to U.S. trade embargoes.” Since receiving a subpoena from OFAC in 2018, Exodus said it has “conducted a comprehensive review” of those transactions, submitted a voluntary self-disclosure to the agency and “took remedial action designed to prevent similar activity from occurring in the future.”
An OFAC spokesperson didn’t respond to a request for comment.
In a separate disclosure, Airbus revealed it’s under criminal investigation by the U.K. for possible export control violations, the aerospace company said in a financial statement released this week. The firm said it’s “fully cooperating” with the probe from the U.K.’s Revenue and Customs Authority. “It is not expected that the resolution of this matter will have a material financial impact,” it said.
Airbus in 2020 agreed to pay more than $3.9 billion in combined penalties for violations of U.S. export controls and the Foreign Corrupt Practices Act (see 2001310040). In June, Airbus DS Government Solutions, a Texas-based subsidiary, was fined $45,000 by the Bureau of Industry and Security for violating U.S. antiboycott regulations (see 2406040041).
Another company, Skybound, a U.S. entertainment and animation business, said it submitted a voluntary self-disclosure to OFAC in April and a “supplemental” disclosure in May after hearing an “unconfirmed report” about a North Korean-connected cloud server containing its “Invincible animation sketch.” The company said the server was connected to a North Korean IP address and filed a voluntary disclosure with OFAC “in an abundance of caution.”
The company doesn’t work with North Korean companies and has “no knowledge of any North Korean companies working on our animation,” it said in an SEC filing. “Our policies strictly prohibit any subcontracting to any third-party without our express prior written consent, which, in this case, was neither sought nor granted. We also mandate that all our service providers fully comply with all applicable rules and regulations and prohibit disclosures of materials by our service providers to third parties.”
Skybound added that it takes “these allegations seriously and has initiated a thorough internal review to verify and rectify any potential issues.” It said it’s cooperating “with all appropriate bodies.”
OFAC in June fined Italian animation company Mondo TV $538,000 after the agency said the firm violated U.S. sanctions by outsourcing work to an animation studio owned by the North Korean government (see 2406260047). That company didn’t voluntarily disclose the violations.