Circle denies allegations of terrorist financing and ties to Justin Sun

What’s new? Circle (the issuer of USDC stablecoin) addressed US Senators Sherrod Brown and Elizabeth Warren to refute accusations of involvement in terrorist financing and ties with TRON blockchain creator and CEO of HTX and Poloniex exchanges Justin Sun. Circle’s public letter was a response to a November 9 letter from Campaign for Accountability (CfA), a non-profit ethics watchdog group, in which it stated that Palestinian groups are actively using USDC on the TRON blockchain.

Circle’s appeal

What is Circle being accused of? In a letter to Brown and Warren, the CfA writes that Circle added support for TRON in July 2021, and two years later, Israel’s National Bureau for Counter Terror Financing (NBCTF) blocked 26 TRON wallets of the Palestinian Islamic Jihad, which collectively held more than $93 million in USDC, blockchain native tokensTRX, and Tether’s USDT stablecoins.

The CfA emphasized that TRON creator Justin Sun had business ties with Circle, even though he “has a history of unscrupulous behavior.” In 2019, for example, he bought out Circle’s Poloniex exchange, which was charged by the US Securities and Exchange Commission (SEC) with operating without registration. In March this year, the SEC accused Sun and related companies of issuing and selling unregistered TRX and BTT crypto asset securities, fraud, and market manipulation. The CfA believes that there is an ongoing internal relationship between Circle and Sun’s companies.

Analysts point to the growing popularity of the TRON blockchain among terrorists

The dominant asset in this network is the USDT stablecoin from Tether

Читать дальше

The CfA also believes that the USDC’s involvement in illicit activity is exacerbated by Circle’s own technology to facilitate cross-chain communication. The Cross-Chain Transfer Protocol (CCTP) tool for transferring assets between networks was launched by Circle in April this year. The CfA noted that it has written to the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) on this issue.

Although Circle is a US company headquartered in Massachusetts (of which Warren is a senator), the CfA believes it has avoided proper regulation:

“The apparent absence of a primary prudential regulator has enabled Circle to issue its USDC coin, at will and without regulatory review and approval, on foreign cryptocurrency networks such as TRON and more than a dozen other like systems that may not meet US compliance standards for combating illicit finance.”

What did Circle respond? Dante Disparte, Circle’s chief strategy officer and head of global policy, said in an open letter to Brown and Warren that the CfA's appeal is full of “errors, omissions, and misleading information.” For example, Circle has always actively cooperated with authorities in the US, Israel, and other countries to freeze and seize USDC coins linked to illegal activity. In November, the company even received a commendation from the US Secret Service for its involvement in uncovering a fraudulent investment scheme and helping to return funds to victims.

As for the $93 million in cryptocurrencies seized from the terrorists, Disparte writes that the CfA misrepresented information gathered by blockchain analysts from the firm Elliptic. Thus, according to network data, these wallets received only $160 in USDC, and none of these coins were purchased directly from the company.

Earlier, Tether CEO Paolo Ardoino also accused WSJ journalists of distorting Elliptic data to overstate the amount of funds allegedly raised by terrorists in cryptocurrencies. After the publication of that article, US lawmakers were also interested in Tether.

Disparte also added that neither Justin Sun nor any of his companies currently have accounts with Circle. Moreover, Circle preemptively closed all accounts of the businessman and his related companies back in February this year, although no sanctions were imposed against him.

Disparte recalled that Circle is strictly regulated by the Treasury Department and agencies of the states of Massachusetts, Ohio, New York, and others, and is required to comply with the Bank Secrecy Act (BSA) and anti-money laundering and countering the financing of terrorism laws. In addition, Circle CEO Jeremy Allaire asked congressmen back in June to pass standards for stablecoin issuers to increase consumer protections.

The company also publicly supported Warren’s amendments to the draft defense budget, which resulted in the inclusion of an expenditure anti-money laundering line item in cryptocurrency.

“Circle has long made combating illicit finance activities – including the use of currency in any form to fund terrorism – a guiding principle of our business,” Disparte concluded.