U.S. and U.K. Target Cryptocurrency Network Assisting Russian Elites in Sanction Evasion

Authorities in the U.S. and U.K. have initiated measures against a money-laundering operation alleged to assist Russian elites in circumventing international sanctions through cryptocurrency, specifically the stablecoin tether.

At the center of this network is Ekaterina Zhdanova, a notable Russian entrepreneur recognized for her role in Tether’s emergence within the financial underground, as reported by the Wall Street Journal.

According to the report, Zhdanova led an entity known as Smart Group, which purportedly enabled the conversion of large cash deliveries into cryptocurrency for prominent clients.

Russian Participants of the Network Sent Tether to Zhdanova

The WSJ report, referencing the U.S. Treasury Department, asserted that Russian participants of the network sent tether to digital wallets managed by Zhdanova.

She is also accused of assisting one client in concealing the source of funds utilized for acquiring property in the U.K.

Zhdanova, along with five other individuals, has now been sanctioned, adding to her previous blacklisting last year.

“Russian elites aimed to leverage digital assets—particularly U.S. dollar-pegged stablecoins—to evade U.S. and international sanctions, further enriching themselves and the Kremlin,” stated Bradley Smith, acting undersecretary for terrorism and financial intelligence at the U.S. Treasury.

Tether, one of the most frequently traded cryptocurrencies, functions as a stablecoin tied to the U.S. dollar. Unlike government-regulated currencies, its transactions frequently occur outside conventional financial oversight.

Russia appreciates crypto as it provides a straightforward method to bypass U.S. financial sanctions.

— Sake (@apebayc) December 4, 2024

While Tether Holdings, the issuer based in the British Virgin Islands, was not directly implicated in this inquiry, U.S. authorities are independently investigating the company for possible breaches of financial crime regulations.

Messages obtained from Zhdanova’s Telegram account indicate she orchestrated significant ruble-to-Tether transactions, with digital wallets associated with her managing over $350 million.

Her extensive network in Russia reportedly included connections to oligarchs and senior officials.

Zhdanova, who previously operated luxury travel services and boutique hotels in Moscow, was apprehended in France in late 2023 as part of a separate money-laundering probe.

U.K. Accuses Smart Group of Financing Russian Spies

The U.K.’s National Crime Agency (NCA), which worked in conjunction with the U.S. Treasury, has charged Smart Group with financing Russian espionage and laundering money for various criminal organizations, including the infamous Irish Kinahan cartel.

A London-based network, allegedly overseen by Zhdanova, has purportedly laundered around $19 million through cash transfers throughout Britain.

The NCA observed that cash deliveries were frequently followed by nearly immediate cryptocurrency transactions of equivalent amounts.

These funds were utilized by criminal organizations to acquire drugs and firearms without physically transporting money across borders.

Authorities have conducted 84 arrests related to the network, according to the report.

Last week, Russian President Vladimir Putin enacted a federal law introducing a new tax regulation on crypto mining while providing legal recognition to digital currencies as property.

The legislation, detailed in an official document released on November 29, outlined tax guidelines and requirements for the cryptocurrency industry.

Russia’s initiative to regulate cryptocurrency mining advanced significantly when it legalized crypto mining in August 2024.

The legislation, which came into effect on November 1, permits only registered Russian entities and entrepreneurs to mine cryptocurrency.

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