The US Treasury Department’s Office of Foreign Assets Control (OFAC) announced new sanctions against a network of companies, their managers, and certain crypto wallets associated with the closed Russia-based crypto exchange Garantex and the ruble-backed stablecoin A7A5. The agency highlighted that this network aids Moscow in evading imposed international sanctions. US officials stated that this measure aims to prevent Russia from using the US-related financial system for sanction-targeted activities.
Garantex and Grinex
According to the announcement, Garantex, established in 2019 and once licensed in Estonia, carried out over $100 million in transactions related to ransomware attacks and illicit digital activities. In collaboration with German and Finnish police units, US authorities seized Garantex’s web domain in March and froze $26 million.
Immediately after Garantex ceased operations, a new entity emerged under the name Grinex. The sanctions announcement alleged that Grinex took over customer funds from Garantex and utilized the A7A5 token to grant users access to their assets once more.
A7A5 Token
The A7A5 stablecoin was developed for Russian users by the Kyrgyzstan-based company, Old Vector. According to OFAC, it was supported by Russia’s State Bank Promsvyazbank (PSB) and implicated Moldovan politician Ilan Shor. PSB had previously been subject to sanctions regarding defense industry financing.
Under the sanctions, Old Vector, A7 LLC, and its affiliates A71 and A7 Agent were banned from conducting transactions in US dollars, and US citizens were prohibited from engaging with these entities or associated crypto wallets.
Additionally, key Garantex executives Sergey Mendeleev, Aleksandr Mira Serda, and Pavel Karavatsky, along with Mendeleev’s companies InDeFi Bank and Exved, were sanctioned. They were accused of allowing sanctioned Russian enterprises to transact through crypto assets.
John K. Hurley, US Treasury Undersecretary for Terrorism and Financial Intelligence, stated, “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.”
Sanctions and Cryptocurrencies
According to blockchain analysis firm Elliptic, by July, the A7A5 token reached $1 billion in daily transactions, allegedly facilitating cross-border payments for Russian companies without using traditional banking mechanisms.
Another analysis firm, Chainalysis, reported that the total transaction volume of the A7A5 token surpassed $51 billion by the end of July, suggesting that this facilitated sanction evasion for Russia. The firm emphasized that the A7A5 network was shaped considering “Russia’s search for alternative payment paths.”
The sanctions imposed by the US Treasury aim to stop Russia from circumventing sanctions through cryptocurrency channels, thereby isolating involved individuals and entities from the global financial system.
