Crypto giant Binance has processed Iranian transactions with a value of $8 billion since 2018 despite U.S. 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, Reuters reported.
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."
120m Users
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.
In July, Reuters said Binance continued to serve clients in Iran and that the exchange's popularity in the country 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.
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 trade.
Exponential Decline
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.
Layers of Intermediaries
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.
Nobitex advises its 4 million customers on its website to avoid "the direct transfer" of crypto between Iranian and foreign crypto platforms to "maintain security."
Binance spokesperson Hillmann told Reuters in June, in relation to the exchange's indirect exposure to illicit funds, that "what's important to note is not where the funds come from - as crypto deposits cannot be blocked - but what we do after the funds are deposited." He said Binance uses transaction monitoring and risk assessments to "ensure that any illegal funds are tracked, frozen, recovered and/or returned to their rightful owner."
In addition to the Tron token, the remainder of the Iranian transactions were in major cryptocurrencies bitcoin, ether, tether and XRP, and a smaller token, litecoin.
Binance is the biggest market for trading Tron, according to industry data. Until recently, Tron has largely flown under the radar of cryptocurrency trackers. Market leader Chainalysis, used by US government agencies, only began fully supporting the tracing of Tron this May, according to an email Chainalysis sent to a client.
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.
Reuters obtained the Tron figures, along with further datasets covering the other crypto tokens, from three firms with access to Chainalysis' Reactor investigation software. Reuters cross-checked each company's figures. A fourth firm also confirmed some of the figures on direct transfers based on a separate dataset compiled using different software.
The total volume of Iranian transactions flowing through Binance is far greater than through any other exchange, the data show. After Binance, the next most popular exchange for Nobitex users since 2018 was Seychelles-based KuCoin, which processed $820 million in direct and indirect transactions.
Binance has grown explosively since its launch in 2017. The company extended its reach from crypto last month by investing $500 million in Tesla boss Elon Musk's buyout of Twitter.
