US Treasury Targets Russian Blockchain Companies for Sanctions Evasion

The US Treasury’s Office of Foreign Assets Control (OFAC) on Monday sanctioned 13 entities and two individuals. They are accused of developing crypto-related services that could facilitate sanctions evasion on behalf of Russian nationals.

OFAC’s designations aim to curb Russia’s use of the global financial system in its conflict with Ukraine. Brian Nelson, Under Secretary of the Treasury for Terrorism and Financial Intelligence, said in a statement that:

“Russia is increasingly turning to alternative payment mechanisms to circumvent US sanctions and continue to fund its war against Ukraine.” The Treasury “will continue to expose and disrupt the companies that seek to help sanctioned Russian financial institutions reconnect to the global financial system,” he added.

OFAC’s rules essentially forbid US individuals from transacting with designated entities within the US. Financial institutions and others are required to adhere to these sanctions to avoid serious repercussions. Engaging with the sanctioned parties via transactions can lead to severe consequences.

US Treasury’s Allegations Against Netex24 and Bitpapa

B-Crypto, Netex24, Tokentrust Holdings, Bitpapa, and Crypto Explorer are among the newly-designated entities.

According to OFAC, the listed entities developed or operated blockchain services in Russia. It alleges that Netex24 and Bitpapa used crypto to transact with sanctioned banks, crypto exchanges, and darknet markets.

Separately, Chainalysis released a blog elaborating on the sanctioned entities’ activities. Per the report, Netex24 and Bitpapa allegedly facilitated transactions for several pro-Russian militia and propaganda groups. These include an OFAC-designated militia group called MOO Veche.

Per Chainalysis, the entities operate in regions like Donetsk, Luhansk, or Crimea in Ukraine.

US Government Escalates Scrutiny on Crypto Activities

The OFAC’s latest move follows the US government’s intense focus on the crypto space in the past two years. It has sanctioned crypto traders who assisted North Korea’s Lazarus Group in converting millions of dollars worth of crypto into fiat currency.

Additionally, in January, OFAC imposed a fifth round of sanctions on networks associated with Palestinian militant group Hamas. This action was a response to Hamas’ attacks on Israel that occurred in October last year.