US sanctioned crypto companies used by Russia to circumvent sanctions

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has imposed sanctions on 13 legal entities and two individuals involved in the financial services and technology sectors of the Russian economy. The US Treasury Department announced this in a statement.

Companies in other nations, such as Tokentrust Holdings Ltd. from Cyprus, Bitfingroup OÜ from Estonia, and Crypto Explorer from the UAE, were also subject to the sanctions.

Fintech firms helped Russia to operate blockchain-based services or provided payments in virtual currency

Most of the individuals and entities facilitated transactions or offered other services that helped already sanctioned organizations circumvent previously imposed sanctions.

All the companies on the OFAC list, which enable them to evade sanctions, either assisted in the creation or operation of blockchain-based services or offered virtual currency payments in the Russian Federation’s financial sector.

In particular, the Moscow-based companies B-Crypto, Masterchain, Laitkhaus, and Atomaiz, according to the US Department, helped Russian banks such as Alfa Bank, Sberbank, Rosbank, VTB, and others conduct their activities, in particular using blockchain technologies, virtual currency, and issuing “tokens” for Russian precious metals and diamonds, the US Treasury Department said in a statement.

“The Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned thirteen entities and two individuals for operating in the financial services and technology sectors of the Russian Federation economy, including persons developing or offering services in virtual assets that enable the evasion of U.S. sanctions. Five entities were designated as being owned or controlled by OFAC-designated persons.”

OFAC statement

These actions, which are a continuation of OFAC’s sanctions from February 23, 2024, target businesses that support Russia’s primary financial infrastructure and aim to “limit Russia’s use of the international financial system to continue its war against Ukraine.”

“Russia is increasingly turning to alternative payment mechanisms to circumvent U.S. sanctions and continue to fund its war against Ukraine. As the Kremlin seeks to leverage entities in the financial technology space, Treasury will continue to expose and disrupt the companies that seek to help sanctioned Russian financial institutions reconnect to the global financial system.”.

Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence.

Crypto companies hit for helping Russia evade existing sanctions

The sanctions list now includes Moscow-based fintech companies B-Crypto, Distributed Ledger Systems, Laitkhaus, Electronic Payment Instrument Development Center, and Atomize that work with sanctioned Russian banks.

The list also includes the operator of the Masterchain platform (Distributed Ledger System). Among the company’s founders are VTB Bank, Gazprombank, Moscow Exchange, Promsvyazbank, National Payment Card System (NPCS), and Fintech Association, some of which are already under US sanctions.

In addition, restrictions were imposed on the Russian companies Web3 Technologies and Web3 Integrator, which work with blockchain technology; the Estonian Bitfingroup OÜ and the Cypriot Tokentrust Holdings, which are all linked to the Russian Federation.

The sanctions were imposed on Web3 Technologies shareholder Igor Kaygorodov and the owner and director of the Center for the Development of Electronic Payment Instruments, Timur Bukanov.

• Crypto Explorer LLC
• Crypto Explorer (DMCC)
• Estonian company Bitfingroup OÜ
• B-Crypto company;
• Masterchain Company;
• Laitkhaus company;
• Atomaiz company;
• Cyprus company Tokentrust Holdings Ltd.
• Web3 Technologies Company
• TOEP Company;
• Bitpapa Company.
• Igor Veniaminovich Kaygorodov and Timur Evgenievich Bukanov.

The United States also imposed sanctions against Echelon Technologies, Echelon Training Center, Key Information Systems, Cyber Security Laboratory, and Echelon Design Bureau over technology purchases.

The US Treasury Department imposed sanctions on three Russian companies that helped Russia purchase technological equipment, including for the defense sector, in order to circumvent sanctions.

The Treasury Department noted that all of the companies sanctioned today either helped create or operate blockchain-based services or provided payments in virtual currency in the Russian financial sector, which allows for potential sanctions evasion.

Importance of penalizing entities for helping Russia circumvent sanctions

In addition, the US Treasury Department is pressuring Austria’s Raiffeisen Bank International, the largest Western bank in Russia, to abandon its plans to buy out Russian oligarch Oleg Deripaska’s “frozen shares” in Austria’s largest construction company, Strabag, for €1.5 billion.

Experts note that it is crucial to close all the loopholes that Russia uses to circumvent sanctions to ensure that sanctions work and deprive the Putin regime of funding its war against Ukraine. 

It is the circumvention of sanctions that has allowed Russia to continue to trade in banned goods and purchase dual-use parts for missiles and drones. At the end of last week, in just a few days, the Putin regime launched hundreds of missiles and drones into Ukraine, causing damage to infrastructure and destroying homes in many Ukrainian cities. 

Thus, helping Russia circumvent sanctions is turning into helping to kill Ukrainians and destroy Ukrainian cities. If Putin feels impunity and is able to purchase weapons technology, this will increase the likelihood of direct Russian aggression against EU states.