Cryptocurrency Firm's Founder Charged in $10M Money Laundering Case

Xeltox Enterprises Ltd., a cryptocurrency firm based in British Columbia, is appealing a record fine of over $176 million imposed by Canada's anti-money laundering watchdog, FinTRAC. This fine, totaling $176,960,190, is the largest ever levied by FinTRAC against a cryptocurrency company.

Xeltox, which operates under the name Cryptomus, contends that FinTRAC made an error by treating the company and its platform as the same entity. The appeal, filed on November 14, claims that Xeltox licenses the Cryptomus platform from Padel West S.A., a Panama-based company, and should not be liable for transactions conducted by other licensees.

However, FinTRAC determined that Xeltox and Cryptomus are functionally identical under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The regulator's investigation uncovered that Xeltox failed to file suspicious transaction reports on over one thousand occasions, with transactions linked to fraud, sanctions evasion, and other illicit activities.

Additionally, the firm neglected to report large virtual currency transactions exceeding $10,000 on more than fifteen hundred occasions, and it failed to comply with a federal directive regarding transactions originating from Iran over seven thousand times.

In total, Xeltox is accused of six violations of the Proceeds of Crime Act, including the failure to develop adequate compliance policies. FinTRAC's findings indicate that Xeltox's actions posed significant risks within the cryptocurrency space, where regulatory compliance is critical.

The company argues that the penalty is excessive and threatens its financial viability, claiming it only possesses $150,000 in assets and reported gross revenue of $983,000 for a recent period. However, FinTRAC disputes these claims, suggesting that Cryptomus could have generated between $15.4 million and $77.2 million in profits over three years.

The scrutiny is not new for Xeltox as it faced prior regulatory issues in May, when the British Columbia Securities Commission temporarily banned the company from trading securities due to potential registration violations.

The appeal and the circumstances surrounding Xeltox highlight ongoing challenges within the cryptocurrency sector, where compliance and security remain paramount as regulatory frameworks evolve. The founder of a Chicago-based cryptocurrency firm has also been charged with a $10 million money laundering conspiracy, further emphasizing the need for stringent regulatory measures within the rapidly evolving crypto landscape.