Xeltox Enterprises Ltd., a cryptocurrency company incorporated in British Columbia, is appealing the more than $176-million fine it received from Canada’s anti-money-laundering watchdog.
The $176,960,190 fine against Xeltox, operating as Cryptomus, is the largest ever levied by the Financial Transactions and Reports Analysis Centre of Canada.
In its appeal, filed on Nov. 14, Xeltox argues that FinTRAC erred in concluding that Xeltox and Cryptomus are “functionally the same entity.”
Xeltox said it licenses the Cryptomus platform from a Panama-based company called Padel West S.A., and that Xeltox shouldn’t be held responsible for transactions conducted by other licensees.
“FinTRAC had mistakenly treated Xeltox as synonymous with the Cryptomus platform, which was owned by Padel, a separate company based in Panama,” the notice of appeal reads.
Anti-money-laundering watchdog hits crypto exchange with highest-ever fine
However, FinTRAC rejected Xeltox’s arguments, finding that “it was more likely than not that Xeltox Enterprises Ltd. and Cryptomus are functionally the same entity” under Canada’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA), according to the court filing.
FinTRAC said in an online notice last month that it found during a compliance investigation that the company had neglected to file suspicious-transaction reports on 1,068 separate occasions in July, 2024. The watchdog said Xeltox failed to flag transactions for which there were “reasonable grounds to suspect” that they were linked to fraud, sanctions evasion, the trafficking of child-abuse material and ransomware payments.
FinTRAC said the company also neglected to report large virtual-currency transactions of $10,000 or more on 1,518 separate occasions, and that it contravened a federal government directive requiring it to report transactions originating from Iran on 7,557 occasions between July 1, 2024, and Dec. 31, 2024.
In total, Xeltox allegedly committed six types of violations of the PCMLTFA, including failing to develop and apply written compliance policies and procedures that are kept up to date and approved by a senior officer, according to FinTRAC.
Canada’s anti-money-laundering laws require entities including financial institutions, real estate and mortgage brokers and cryptocurrency exchanges to report certain types of transactions to FinTRAC. The centre analyzes the information it receives and discloses financial intelligence to law-enforcement agencies.
Xeltox, which said it is in the business of providing technology that allows merchants to accept cryptocurrency payments, said the proposed penalties are “so high that they bring the company to the brink of bankruptcy,” according to the court document.
Xeltox has previously run into regulatory trouble in Canada. In May, the B.C. Securities Commission, or BCSC, temporarily banned the company from trading securities or derivatives, or engaging in promotional activities, after determining that Xeltox may have violated the province’s registration requirements.
Platforms that allow Canadians to buy and sell crypto assets are required to register with provincial securities regulators.
Although the temporary order expired on June 4, the website for Cryptomus appears to be inaccessible in Canada.
Although Xeltox is incorporated in B.C., the company doesn’t appear to have a physical presence in Canada. It has no Canadian employees, and its registered address in Vancouver is associated with a mailbox service, according to FinTRAC.
The company’s sole director is Uzbekistan resident Sabina Salim Kizi Berdieva, FinTRAC said. Kakhanova Renata Andreyevna, a resident of Kazakhstan, filed to trademark the Cryptomus name and branding at the Canadian Intellectual Property Office in September, 2024, according to FinTRAC.