CfA Responds to USDC-issuer Circle’s Denial of Terror Financing Entanglements
FOR IMMEDIATE RELEASE: December 14, 2023
Contact: Michael Clauw, firstname.lastname@example.org, 202.780.5750
WASHINGTON, D.C. – Today, Campaign for Accountability (CfA) sent a letter to Senators Sherrod Brown (D-OH) and Elizabeth Warren (D-MA) highlighting incomplete and misleading information contained within Circle Chief Strategy Officer and Head of Global Policy, Dante Disparte’s response to previous concerns CfA raised about the company’s operations.
On November 9, CfA sent a letter to Sens. Brown and Warren alerting them to apparent entanglements between Circle’s USDC stablecoin, Asian blockchain network TRON, and TRON’s unscrupulous founder, Justin Sun. Despite Sun’s questionable behavior—publicly known before Circle strengthened ties with him—Circle issues its USDC on his TRON network. Some of this USDC was caught up in a July 2023 Israeli asset seizure of TRON wallets linked to the terror group Palestinian Islamic Jihad (PIJ). The unregulated integration that led to this outcome, along with Circle’s “Cross-Chain Transfer Protocol,” which enables a type of money laundering known as “chain-hopping,” were chief among CfA’s concerns.
“Rather than addressing the matters CfA raised, Mr. Disparte sidestepped the primary allegations and instead denied claims CfA did not make,” CfA Executive Director Michelle Kuppersmith wrote in today’s letter.
Primarily, Mr. Disparte did not dispute that allegation that USDC was among the currencies involved in the Israeli agency’s July 2023 action. He instead argued that, because USDC constituted a small percentage amount siezed, CfA’s concerns are unfounded. Yet, in the course of disputing the amount, Mr. Disparte confirmed that the integration with TRON can indeed enable illicit activity using USDC. Nowhere in his response does Mr. Disparte mention his company’s new “Cross-Chain Transfer Protocol,” or comment on CfA’s assertion that it may further illicit activity by allowing more seamless transfers of USDC between TRON and other blockchains.
Notably, since CfA’s letter last month, media accounts have reaffirmed the connections between Hamas, Hezbollah and TRON. For example, on November 27 Reuters reported: “Tron has overtaken its rival as a platform for crypto transfers associated with groups designated as terror organizations by Israel, the United States and other countries, according to interviews with seven financial crime experts and blockchain investigations specialists.” Despite this growing consensus, Circle appears unconcerned with CfA’s primary worry over USDC’s integration with this network.
Mr. Disparte also did not dispute the specifics of its relationship with Mr. Sun, but wrote merely that Circle no longer “banks” Justin Sun. In fact, Mr. Disparte’s letter discloses—for the first time—that until seven months ago Mr. Sun and/or his companies did ‘bank’ with Circle. It is unclear what this means given that Circle doesn’t have a banking license – a concern CfA first raised in a 2022 letter to the SEC.
Ms. Kuppersmith continued, “The issues CfA raised in its earlier letters and Circle’s response demonstrate the pressing need for congressional review and oversight of this significant issue, particularly given the lack of a primary prudential regulator. How and to what extent crypto currencies may be financing terrorist organizations and America’s enemies is not only an important banking issue, but also a critical national security matter.”
Campaign for Accountability is a nonpartisan, nonprofit watchdog organization that uses research, litigation, and aggressive communications to expose misconduct and malfeasance in public life and hold those who act at the expense of the public good accountable for their actions.