Crypto hubs in Estonia and Lithuania have been channeling funds for Russians, a group of journalists claim
Crypto exchanges in two EU countries, Estonia and Lithuania, have helped Russians circumvent Western sanctions and been instrumental in the laundering of over €1 billion ($1.05 billion) in assets, according to an investigation by a group of international journalists.
The report was published on Wednesday on VSquare news outlet’s website, and the investigation was carried out by the VSquare team in collaboration with journalists from Delfi, Siena, Fronstory, Paper Trail Media, Der Spiegel, ZDF, and Der Standard news outlets.
According to the report, due to its liberal crypto licensing system introduced in 2017, Estonia has become a global hub for crypto companies over the past six years. As of mid-2021, nearly 55% of the globe’s virtual currency service providers were registered in the country (around 1,600 firms), flocking there to obtain the prestigious status of being an EU-licensed firm.
However, a study of roughly 300 Estonian-registered crypto companies reportedly revealed numerous irregularities.
“Looking through hundreds of licensed companies, we found Russian intelligence ties, vast money laundering operations, dozens of cases of international fraud, and a serious lack of transparency: hired actors, fake profiles, and fraudulent owners of the companies,” the report claims. The article adds that by using the credibility given to these companies by their EU-registered licenses, they have been able to launder or defraud victims of over $1 billion in crypto assets.
“The term ‘licensed in the EU’ became a selling point for international fraudsters who used the jurisdiction to inject trust in their illegal operations,” it stated.
Reporters also allegedly discovered cases of sanctions evasion. Following the start of the Ukraine conflict last year, Russians were stripped of many international financial instruments by Western sanctions. Most notably, Russian banks were disconnected from the SWIFT interbank messaging system, which virtually deprived them of the ability to transfer funds internationally. Crypto offered an alternative for cross-border transactions and near-total anonymity, which many reportedly used to their advantage.
The Russian private military group Rusich, for instance, was found to have used nine cryptocurrency wallets in Estonia to raise at least $210,000 between 2022 and 2023. Meanwhile, Estonia’s Coinsbit platform reportedly enabled users to convert Russian rubles into Bitcoin. Another crypto exchange, MEXC, reportedly offered ruble payments via its person-to-person, or P2P, mechanism. Payeer, a popular crypto exchange and payment processor, was found to have published video tutorials on how to bypass Western financial sanctions using the platform.
In 2022, Estonia tightened its anti-money laundering regulations to flush illicit crypto financiers out of its market, and over 1,500 crypto companies lost their licenses, according to the report. However, many of these firms allegedly relocated to neighboring Lithuania, which currently hosts over 800 virtual assets firms, up from only 20 in 2019.
The investigation found links between one of these crypto companies and Russia’s largest lender, Sber. Estonia’s MoneySwap OÜ, which operated the virtual assets platform Mercuryo, relocated to Lithuania in 2022 as MoneyAmber UAB. Journalists discovered that the company’s shares are managed through a Cypriot company, MRCR Holdings, which counts Akshin Dzhangirov, the brother of the Chief Risk Officer at Sber, Dzhangir Dzhangirov, among its shareholders. The report did not reveal whether the brothers were involved in sanctions evasion schemes, but noted that Akshin received about $300,000 in income from Sber in 2021.
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October 05, 2023 at 08:18PM