US Treasury Strikes Russian Crypto Channels

The United States Treasury Department has unveiled stringent sanctions, focusing on a network linked to the defunct Russian cryptocurrency exchange Garantex and the ruble-backed stablecoin known as A7A5. This action highlights their role in helping Moscow dodge international sanctions. The US authorities conveyed that the sanctions are part of a broader strategy to cut off Russia from leveraging the US financial structure for sanctioned activities.

What is the Link Between Garantex and Grinex?

Garantex, which began operations in 2019 with an Estonian license, has facilitated transactions worth over $100 million linked to ransomware and other illicit digital activities, according to officials. Collaborating with German and Finnish authorities, the US successfully seized the web domain of Garantex in March and immobilized $26 million. Following the shutdown of Garantex, a new platform called Grinex emerged, reportedly taking over the existing customer assets and using the A7A5 token to restore access to users.

How Did A7A5 Token Become Part of the Network?

The A7A5 stablecoin, crafted to serve Russian cryptocurrency users, found its roots in a Kyrgyzstan company, Old Vector. OFAC stated that the token received backing from Russia’s State Bank Promsvyazbank, involving Moldovan political figure Ilan Shor. Notably, Promsvyazbank had previously faced sanctions for its role in defense financing. The comprehensive sanctions now impede Old Vector, A7 LLC, and affiliates A71 and A7 Agent from any US dollar transactions, barring US individuals from dealings with these entities or associated wallets.

Moreover, sanctions targeted key figures from Garantex, such as Sergey Mendeleev, Aleksandr Mira Serda, and Pavel Karavatsky, alongside Mendeleev’s businesses InDeFi Bank and Exved, due to their involvement in facilitating transactions for sanctioned Russian entities via crypto assets.

“The use of cryptocurrency exchanges as intermediaries for money laundering and ransomware attacks not only threatens our national security, but it also tarnishes the reputation of honest virtual asset service providers,” noted John K. Hurley, US Treasury Undersecretary for Terrorism and Financial Intelligence.

Elliptic, a blockchain analytics firm, reported that by July, the A7A5 token had reached a daily transaction volume of $1 billion, suggesting its role in Russian companies’ cross-border transactions without conventional banking channels. Similarly, Chainalysis indicated the total transactions of A7A5 exceeded $51 billion by the end of July, emphasizing its utility in Russia’s efforts to bypass sanctions through alternative payment networks.

– The A7A5 token, supported by the Russian state, facilitated substantial cross-border transactions.
– US sanctions aim to dismantle Russian evasion tactics through these digital networks.
– Collaboration between authorities in the US, Germany, and Finland has targeted entities involved in illicit activities.

This decisive move by the US Treasury seeks to sever Russia’s avenues for sanctions circumvention, isolating involved parties from the international financial system and reiterating the US commitment to global regulatory compliance.