Xeltox Enterprises Ltd., a cryptocurrency company registered in British Columbia, is challenging a fine of nearly $177 million imposed by Canada’s financial intelligence agency last month. The firm argues in its appeal to the Federal Court that the penalties issued by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) were based on legal errors.
The company contends that FINTRAC accused it of failing to report suspicious transactions, including over 7,500 transactions linked to Iran, which Xeltox claims it had no awareness or control over. Xeltox states that it licenses its software from a Panama-based company that owns the Crytomus platform and asserts that FINTRAC mistakenly identified them as the same entity.
Xeltox Enterprises, operating as Cryptomus, is a registered money services business with FINTRAC, but it claims that the alleged violations were committed by foreign licensees of the Cryptomus platform not associated with Canada. FINTRAC’s director and CEO, Sarah Paquet, disclosed that the record penalty was imposed due to numerous breaches involving activities such as child exploitation, fraud, ransomware payments, and sanctions evasion.
A significant aspect of the case involved 1,068 instances where Cryptomus failed to report transactions related to darknet markets and virtual currency wallets associated with criminal activities. Darknet markets are digital platforms where illicit goods and services are traded anonymously, and virtual currencies provide anonymity for transactions, attracting criminal elements.
FINTRAC highlighted that Cryptomus breached not only anti-money laundering regulations by failing to flag suspicious transactions but also failed to report 7,557 transactions originating from Iran during a specific period. In the fiscal year 2024-2025, FINTRAC issued 23 violation notices, the highest in its history, resulting in penalties exceeding $25 million. Since gaining enforcement powers in 2008, FINTRAC has imposed over 150 penalties.
The appeal by Xeltox Enterprises challenges the substantial fine imposed by FINTRAC, emphasizing discrepancies in the allegations made against the company.