Crypto exchange Binance helped Iranian firms trade $8 billion despite sanctions

Crypto giant Binance has processed Iranian transactions with a value of $8 billion since 2018 despite US sanctions intended to cut Iran off from the global financial system, blockchain data show.

Almost all the funds, some $7.8 billion, flowed between Binance and Iran's largest crypto exchange, Nobitex, according to a review of data from leading US blockchain researcher Chainalysis. Nobitex offers guidance on its website on how to skirt sanctions.

Three-quarters of the Iranian funds that passed through Binance were in a relatively low-profile cryptocurrency called Tron that gives users an option to conceal their identities. In a blog post last year, Nobitex encouraged clients to use Tron - a mid-tier token - to trade anonymously without "endangering assets due to sanctions."

The scale of Binance's Iranian crypto flows – and the fact that they are continuing – has not been previously reported.

The new findings come as the US Justice Department is pursuing an investigation into possible violations of money-laundering rules by Binance, which dominates the $1 trillion crypto industry, with over 120 million users. The transactions put the company at risk of falling afoul of US prohibitions on doing business with Iran, lawyers and trade-sanctions experts said.

The Tron dataset details over 1.15 million direct transfers between Binance and Nobitex since April 2020, when the first Tron flows were recorded. The data include wallet addresses and a unique identification number for each transaction.

In July, Reuters revealed that Binance continued to serve clients in Iran and that the exchange's popularity in the Islamic republic was known inside the company. It was one of a series of Reuters investigations into Binance's troubled history with financial regulatory compliance. The day of that article's publication, Binance said in a blog post that it follows international sanctions rules on Iran and blocks access to the platform to anyone based there. The exchange's billionaire founder, Changpeng Zhao, tweeted: "Binance banned Iranian users after sanctions, 7 got missed/found a workaround, they were banned later anyways."

Binance didn't answer detailed questions about the new transactions uncovered by Reuters. In a statement, spokesperson Patrick Hillmann said, "Binance.com is not a US company, unlike other platforms that have exposure to these same US sanctioned entities. However, we have taken proactive steps to limit our exposure to the Iranian marketplace," working with industry partners and internal tools.

Binance declines to give details of the location or the entity behind its Binance.com exchange.

Nobitex didn't respond to questions for this article. Nor did the Tron Network, based in the British Virgin Islands, and its founder Justin Sun.

In August 2021, Binance announced that customers would no longer be able to open accounts and use its services without identification. But since then, the exchange has processed almost $1.05 billion in trades directly from Nobitex and other Iranian exchanges, according to the Chainalysis data, which runs to November of this year. Since Zhao's tweet in July, Binance has processed around $80 million in Iranian trades.

Hillmann said in the Binance statement that the company requires full "Know Your Customer" checks for all users "and residents of Iran are prohibited from opening or maintaining an account. We are continually updating processes and technology as we learn about new risks and potential exposures. As a result of these efforts, including real-time transaction monitoring in coordination with external vendors, between June of 2021 and November of 2022, Binance's exposure to Iranian-linked entities has seen an exponential decline."

The data reviewed by Reuters show that in total some $2.95 billion in crypto moved directly between Iranian exchanges and Binance since 2018.

A further $5 billion in crypto moved between Iranian exchanges and Binance through layers of intermediaries, the data also reveal. Regulators say such "indirect" flows should be a red flag to crypto exchanges - an indicator of possible money laundering and sanctions evasion. Crypto users seeking to cover their tracks often use sophisticated techniques to create complex chains of crypto transfers.

U.S. entities that violate the Iran sanctions can face criminal fines of up to $1 million per violation. People involved can face jail terms of up to 20 years. This October, the Treasury fined Seattle-based crypto exchange Bittrex $24 million for violating sanctions on Iran and other countries by processing crypto transactions worth over $260 million. Bittrex said at the time it was "pleased to have fully resolved" the matter.