During a two-month period in 2020, a Russian man named Nikita Krasnov purchased about $1.16 million worth of newly minted USDT — the widely used stablecoin made by the cryptocurrency company Tether. A little more than four years later, Krasnov was sanctioned by U.S. authorities for his role in an expansive sanctions evasion scheme catering to Russian elites.

It’s a story that repeats itself across Tether’s customer base. Tether’s USDT token, whose value is pegged 1-to-1 to the U.S. dollar, has become one of the most widely used types of cryptocurrency in illicit finance. But the 12-year-old company has long claimed that it does thorough due diligence on its primary customers — that is, the people and institutions…