The United States Department of Justice (DOJ) has charged seven persons for global sanction evasion using digital assets in a multi-million-dollar scheme. According to the indictment unsealed at a federal court in Brooklyn, New York, five of the seven are Russian nationals, while the rest are Venezuelans.
According to the court documents, the defendants are being charged with operating a ring that used shell companies and virtual assets to bypass laid-down sanctions against Russia and her oligarchs.
“As alleged, the defendants were criminal enablers for oligarchs, orchestrating a complex scheme to unlawfully obtain U.S. military technology and Venezuelan-sanctioned oil through a myriad of transactions involving shell companies and cryptocurrency,” said the United States Attorney Breon Peace.
One of the key defendants in the matter is Yury Orekhov, co-owner of Nord-Deutsche Industrieanlagenbau GmbH, a firm identified as a front for the purchase of U.S. military equipment. The goods were shipped to sanctioned companies with ties to Russia’s Defense Ministry, and if found guilty, the defendants face up to 30 years in prison.
The DOJ’s filing revealed that three of the defendants “consummated a transaction involving 500,000 barrels of Venezuelan oil from PDVSA through Tether (USDT), a cryptocurrency pegged to the dollar.” Given the current oil price, the deal with the USDT stablecoin in the region has been touted to be a staggering $40 million.
Prosecutors are investigating a virtual currency transaction involving the defendants and the shell companies they operated. Orekhov praised the efficiency of stablecoins in facilitating his illicit ventures saying to a fellow defendant, “no worries, no stress. As soon as we start berthing, we will immediately transfer. USDT works quick like SMS.”
A tale of evading sanctions with digital assets
Digital assets have always had a long and storied history of being used for illegal operations, but recently, they have found usage in evading sanctions. For example, Venezuela had attempted to use its virtual currency Petro to sell its sanctioned oil to buyers around the world.
“We will sell Venezuelan oil in exchange for Petros,” said President Nicholas Maduro. “We have already signed contracts for the sale of oil, steel, iron, and aluminum, and we will sell part of the gold for Petros.”
Since Russia invaded Ukraine in February, the West responded by imposing a slew of economic sanctions, which analysts claim could shrink the country’s economy by as much as 10%. As a way around the sanctions, Russia’s Ministry of Finance is mulling over the use of virtual currencies as a means of settlement for cross-border transactions.
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