Defunct Crypto Exchange ShapeShift Settles OFAC Sanctions Violations with $750K Payment

The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) announced, that ShapeShift has agreed to pay $750,000 to resolve potential civil liabilities tied to sanctions violations. The Swiss-incorporated digital asset exchange, which operated from Denver, Colorado, processed transactions with users in Cuba, Iran, Sudan, and Syria between December 2016 and October 2018. Federal regulators highlighted the platform's lack of screening measures during that period, allowing over $12.5 million in cryptocurrency exchange swaps to occur without checks for sanctioned locations.

ShapeShift's founders, including early cryptocurrency advocate Erik Voorhees, built the service to prioritize user privacy by skipping traditional know-your-customer requirements. Users could exchange assets like Bitcoin and Ethereum directly through wallet addresses, with the platform acting as the counterparty. This approach drew backing from prominent figures such as Roger Ver and Barry Silbert, but also exposed the exchange to regulatory scrutiny over time.

ShapeShift's Operational History and Regulatory Challenges

ShapeShift launched in 2014 as a non-custodial platform that facilitated onchain swaps for up to 79 different digital assets at its peak, handling as many as 20,000 transactions daily. The company collected a premium on market rates for each exchange, and all activity remained publicly visible on the blockchain. Despite its Swiss incorporation, ShapeShift maintained a U.S. headquarters in Denver, where American personnel directed key functions, including software development and transaction algorithms.

Regulators noted that ShapeShift possessed IP address data as the primary indicator of user location yet failed to integrate it into any compliance framework until after receiving an administrative subpoena from OFAC. This oversight led to 17,183 apparent violations across multiple sanctions programs, including the Cuban Assets Control Regulations and the Iranian Transactions and Sanctions Regulations. The total value of these transactions reached $12,570,956, with specific breakdowns showing thousands of instances per jurisdiction.

The settlement amount reflects OFAC's assessment of the case as non-egregious and not voluntarily disclosed, starting from a base penalty of $39,515,000 under enforcement guidelines. Adjustments considered ShapeShift's status as a defunct entity with limited assets, following its closure in early 2021. Federal officials pointed to aggravating elements, such as the exchange's awareness of potential sanctioned users through IP data and the resulting economic benefits conveyed to those regions.

Mitigating circumstances included ShapeShift's small scale during the violations, its cooperation with the investigation, and remedial steps taken post-subpoena. These efforts encompassed mandatory screening against the Specially Designated Nationals List, IP-based denial procedures, and daily rescreening protocols. The company also implemented training on sanctions and blacklisted addresses linked to suspicious activity.

ShapeShift's path also intersects with prior regulatory encounters. In 2024, the Securities and Exchange Commission issued a cease-and-desist order and a $275,000 fine after probing unregistered broker activities. Broader lessons from the enforcement release stress early integration of sanctions checks during product development. Delays in building these programs heighten exposure to penalties, particularly for services handling cross-border flows.

Following the closure of ShapeShift, Erik Voorhees turned his focus to other projects such as Thorchain, and recently, Venice AI, a platform designed to prioritize user privacy and decentralization in the realm of artificial intelligence. Venice AI made its debut in 2024, gaining substantial momentum in January 2025 with the launch of its VVV token on the Ethereum Layer 2 network Base, which represented a key advancement in blending blockchain mechanics with AI capabilities. Voorhees has since dedicated his efforts to expanding Venice AI's offerings, delivering AI services that safeguard user data, counter censorship, and rely on open-source models alongside decentralized systems to foster a more secure technological ecosystem.