tl;dr
The U.S. Treasury’s OFAC imposed sanctions on multiple companies and individuals accused of using stablecoins to help Russia evade international sanctions related to the Ukraine war. Key targets include A7 LLC and its subsidiaries, linked to the ruble-backed A7A5 stablecoin, owned by sanctioned figu...
The U.S. Treasury’s Office of Foreign Assets Control (OFAC) imposed sanctions on multiple companies and individuals accused of exploiting stablecoins to help Russia evade international sanctions related to its war in Ukraine on August 14. These designations target Russian-linked businesses and foreign intermediaries alleged to facilitate large-scale cross-border transactions for sanctioned entities, underscoring OFAC’s intensified focus on stablecoins. Regulators view stablecoins as a favored medium for sanctions evasion due to their rapid transaction speeds, global reach, and comparatively low costs versus traditional banking systems.
One notable case involves A7 LLC, the creator of the ruble-backed stablecoin A7A5, implicated in daily transfers amounting to approximately $1 billion, according to blockchain analytics firm Elliptic. A7 and its subsidiaries, A71 and A7 Agent, are primarily owned by Ilan Shor and Russian state-owned Promsvyazbank (PSB), both sanctioned. Shor has a prior conviction for embezzling $1 billion from Moldovan banks, while PSB is linked to financing Russia's defense sector. Allegations also include undermining democratic processes abroad, specifically vote-buying in Moldova’s upcoming 2024 elections. Old Vector LLC in Kyrgyzstan issues the A7A5 token and operates within a regulatory environment considered permissive by U.S. standards, yet its activities are integral to Russia’s sanctions evasion efforts.
OFAC also targeted entities connected to Sergey Mendeleev, co-founder of the sanctioned Garantex crypto exchange, which facilitated illicit fund movements using Tether’s USDT stablecoin. The U.S. Secret Service helped dismantle Garantex and freeze $26 million in USDT with Tether's cooperation. Mendeleev also developed the “Cryptorouble” (RUBT) stablecoin and runs Exved, a cross-border payment platform employed by Russian exporters and importers under sanctions. By utilizing USDT, Exved conceals Russian business ties in monthly transactions worth tens of billions of rubles. Technical support to Exved is provided by Indefi Smartbank, backed by Russian oligarch Alexander Lebedev. Additionally, Kyrgyzstan-based Grinex, identified as Garantex’s successor, was sanctioned for facilitating trades in A7A5 and USDT.
This enforcement action highlights OFAC’s escalating scrutiny of cryptocurrency’s role in sanctions evasion. The agency has expanded its Specially Designated Nationals (SDN) list to include digital asset addresses, enabling exchanges, payment processors, and financial institutions to block transactions linked to sanctioned actors. Blockchain analytics firms like Elliptic have updated monitoring tools to enable clients to detect and block transactions associated with sanctioned wallets and entities. Regulators have expressed clear intent to continue targeting stablecoin-based systems that circumvent traditional financial mechanisms, viewing them as an increasing challenge to sanctions compliance worldwide.