Crypto exchange fined over more than 17,000 possible sanctions violations

The U.S. Treasury’s Office of Foreign Assets Control (OFAC) has fined ShapeShift AG, a defunct crypto exchange, $750,000 for 17,183 apparent violations of U.S. sanctions laws

• Erik Voorhees’ defunct crypto exchange ShapeShift has been ordered to pay a $750,000 fine to settle its case with the US Treasury after it processed $12.6 million in potentially sanction-violating crypto transactions.
• The order, published by the Office of Foreign Assets Control (OFAC) yesterday, stems from 17,183 possible sanctions violations involving the firm’s offering of digital asset transactions to users in Cuba, Iran, Sudan, and Syria between 2016 and 2018.
• ShapeShift usage from Iranian users alone made up 16,839 of these possible sanction violations.
• The exchange had no sanctions compliance program in place to check users for any possible violations, which OFAC claims showed “a minimal degree of caution or care for its sanctions compliance obligations.”
• Additionally, OFAC determined that ShapeShift likely knew it was dealing with sanctioned jurisdictions thanks to the IP address data it was collecting.
• It only introduced such a program after OFAC issued it a court subpoena. It then began to screen for individuals from OFAC’s Specially Designated Nationals and Blocked Persons List or any sanctioned jurisdictions.
• As such, OFAC determined that “ShapeShift did not voluntarily self-disclose the apparent violations and that the apparent violations constitute a non-egregious case.”
• Last year, the exchange was ordered to pay a $275,000 fine to settle an illegal securities case with the US Securities and Exchange Commission and was issued a cease-and-desist order.
• It found the exchange was using its own crypto assets to trade against its own users, and that it misleadingly branded itself as a simple “vending machine” instead of a sophisticated counterparty.
• ShapeShift shut down its corporate operations in 2021 and converted itself into a decentralised autonomous organisation governed by holders of its FOX token.
• ShapeShift’s CEO Erik Voorhees is now pivoting to the AI industry and has launched his own AI platform, which he says will rival Sam Altman’s ChatGPT and Dario Amodei’s Claude.

Key Facts:

• Violations: ShapeShift facilitated digital asset transactions for users in Cuba, Iran, Sudan, and Syria, all of which are subject to comprehensive U.S. sanctions.
• Timeframe: The violations occurred between December 2016 and October 2018.
• Transaction Volume: These transactions totalled approximately \$12.6 million.
• Majority from Iran: Of the 17,183 violations, 16,839 were linked to users in Iran.

Compliance Failures:

• ShapeShift had no sanctions compliance program in place during the relevant period.
• It failed to screen users or transactions, despite having access to IP address data that clearly indicated user locations.
• The company only began implementing compliance measures after receiving an administrative subpoena from OFAC.

Settlement Considerations:

• OFAC initially calculated a base penalty of \$39.5 million, but reduced it to \$750,000 due to:
• ShapeShift’s defunct status and limited financial resources
• Its cooperation with the investigation
• The non-egregious nature of the violations
• Subsequent remedial actions, including sanctions screening and training

Notable Background:

• ShapeShift was founded by Erik Voorhees, a vocal critic of OFAC who previously called the agency “unjust,” “unethical,” and “anti-American”.
• Despite being incorporated in Switzerland, the company was operated from Denver, Colorado, making it subject to U.S. jurisdiction.

References

• Settlement Agreement between the U.S. Department of the Treasury's ...https://ofac.treasury.gov/recent-actions/20250922_33
• OFAC Penalises ShapeShift AG $750,000 for Apparent Sanctions Violations https://blog.volkovlaw.com/2025/09/ofac-penalizes-shapeshift-ag-750000-for-apparent-sanctions-violations/
• https://cryptonews.net/news/legal/31672979 https://cryptonews.net/news/legal/31672979/