Iran’s ex-central bank chief and officials sentenced to prison

Tehran, Iran – The former governor and several former officials in Iran’s central bank have been sentenced to prison for illegal practices in managing the country’s tumultuous foreign currency market under United States sanctions.

Valiollah Seif, who led the troubled central bank for almost five years until his sacking in July 2018, was sentenced to 10 years in prison, judiciary spokesman Zabihollah Khodaeian told state television on Saturday.

Seif, who was appointed as a top banking adviser to then-President Hassan Rouhani immediately after leaving the central bank amid corruption allegations, was found guilty of “participation in disrupting the country’s financial system through illegal smuggling of foreign currency”.

In May, Tehran’s prosecutor general had announced that an indictment was issued against Seif, and his case was to be sent to a special court set up to investigate financial crimes. At the time, Seif had been accused of “wasting” $30bn and 60 tonnes of gold reserves.

Seif was replaced with Abdolnasser Hemmati, a technocrat who was fired by Rouhani in late May after he announced he will run for president against Ebrahim Raisi.

On Saturday, Ahmad Araghchi, nephew of former top nuclear negotiator Abbas Araghchi, who was deputy for foreign currency affairs at the central bank until his abrupt arrest in 2018, was also sentenced to eight years in prison.

A 30-year-old man named Salar Aghakhani, who was the point person on the ground for the officials’ illegal scheme, was sentenced to 13 years in prison.

The three were among 10 people who have been identified as being part of the scheme, and some of their cases are ongoing, the judiciary spokesman said.

Illegal currency distribution scheme

The individuals have been found guilty of organising and implementing a harmful scheme that was supposedly aimed at preventing further depreciation of Iran’s battered currency, the rial.

Araghchi became deputy for foreign currency affairs in 2017, when concerns over the election of US President Donald Trump were gradually affecting the Iranian market.

Trump in May 2018 unilaterally withdrew from Iran’s 2015 nuclear deal with world powers, marking the beginning of his “maximum pressure” campaign of sanctions that eventually targeted all sectors of Iran’s economy.

But from months before, Iran’s currency had been yanked out of a short period of relative calm and was fast depreciating. After hitting numerous consecutive all-time lows, the embattled rial hit a nadir of about 320,000 per US dollar in October 2020. It now changes hands for more than 270,000 per greenback at the open market. This is while its rate was below 40,000 against the dollar.

Mizan, the official news outlet of the judiciary, said on Saturday that Seif and Araghchi hired the inexperienced Aghakhani – who had bribed Meysam Khodaei, an adviser at the presidential office who was also sentenced to prison – to secretly distribute foreign currencies in the volatile market in an effort to help calm it.

Aghakhani reportedly received packages containing dollar, euro and dirham banknotes worth between $5m and $8m 28 times, and distributed the money among a select number of currency exchanges with little to no supervision from the central bank. The governor was said to be fully aware of the scheme.

This, the judiciary outlet said, not only did not help quell tensions in the market, but also led to wasting hundreds of millions of dollars and their distribution among speculators inside and outside the country.

Moreover, after Aghakhani was arrested on an unannounced date, the central bank reportedly wrote to the judiciary to call for his release. The Mizan report said the unidentified person who wrote the letter was subsequently also arrested and indicted.

“The issued sentences for the indicted individuals are definitive and must be carried out,” the report said.