In a landmark case for Canada's financial technology sector, a British Columbia-incorporated cryptocurrency company is challenging the largest monetary penalty ever issued by the country's anti-money laundering authority.
Record Fine and Grounds for Appeal
Xeltox Enterprises Ltd., operating under the name Cryptomus, has formally appealed the $176,960,190 fine levied by the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC). The company filed its notice of appeal on November 14, contesting the watchdog's foundational conclusion that Xeltox and the Cryptomus platform are functionally the same entity.
Xeltox argues that it merely licenses the Cryptomus platform from a Panama-based company called Padel West S.A. and should not be held accountable for transactions conducted by other entities using the platform. "FinTRAC had mistakenly treated Xeltox as synonymous with the Cryptomus platform, which was owned by Padel, a separate company based in Panama," the appeal document states.
Severe Compliance Failures Alleged
FinTRAC's decision, however, was based on a compliance investigation that uncovered what it describes as systemic and severe violations of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
The agency's findings, detailed in an online notice, include:
- Failure to file suspicious transaction reports on 1,068 separate occasions in July 2024. These unreported transactions had "reasonable grounds to suspect" links to fraud, sanctions evasion, child-abuse material trafficking, and ransomware payments.
- Neglect to report large virtual currency transactions of $10,000 or more on 1,518 separate occasions.
- Contravention of a federal directive by failing to report transactions originating from Iran on 7,557 occasions between July 1, 2024, and December 31, 2024.
In total, FinTRAC alleges Xeltox committed six types of violations, including a failure to develop and maintain up-to-date compliance policies approved by a senior officer.
Broader Implications and Company Background
The appeal highlights the intense regulatory scrutiny facing the cryptocurrency industry in Canada. Xeltox, which describes its business as providing technology for merchants to accept crypto payments, claims the proposed penalties are "so high that they bring the company to the brink of bankruptcy."
This is not the company's first regulatory challenge. In May, the B.C. Securities Commission (BCSC) issued a temporary order banning Xeltox from trading securities or derivatives, citing potential violations of provincial registration rules. Although that order expired on June 4, the Cryptomus website remains inaccessible in Canada.
Despite being incorporated in B.C., Xeltox appears to have a minimal physical presence in the country. FinTRAC notes the company has no Canadian employees, and its registered Vancouver address is associated with a mailbox service. The firm's sole director is identified as Uzbekistan resident Sabina Salim Kizi Berdieva.
The case underscores the obligations of Canadian cryptocurrency exchanges to register with provincial securities regulators and report specific transactions to FinTRAC, which then analyzes the data for law enforcement agencies. The outcome of this appeal could set a significant precedent for how digital asset firms are regulated under Canada's anti-money laundering laws.
