US Sanctions Crypto Network Linked to Russian Sanctions Evasion

The U.S. Treasury Department's Office of Foreign Assets Control (OFAC) has announced sanctions against a network of companies, exchanges, and executives allegedly involved in helping Russia circumvent international sanctions. The targeted entities are linked to the now-shuttered crypto exchange Garantex and the ruble-backed stablecoin A7A5.

Key Highlights:

• Garantex: The Estonia-licensed exchange processed over $100 million in transactions connected to ransomware and darknet activities. Its domain was seized, and funds were frozen, leading to the creation of a successor, Grinex.
• A7A5: This ruble-backed stablecoin, issued by Old Vector, was reportedly used by Grinex to restore access to customer funds after the Garantex seizure. It's designed for Russian users of cross-border settlement platform A7 LLC.
• Sanctioned Entities: OFAC sanctioned Old Vector, A7 LLC, its subsidiaries, and several key Garantex executives, including Sergey Mendeleev, blocking them from the U.S. financial system.

Why This Matters

According to authorities, the action aims to cut off digital asset channels used for ransomware and sanctions evasion. Treasury officials emphasized the threat posed by exploiting cryptocurrency exchanges for illicit activities.

The A7A5's Role

Blockchain analytics firm Elliptic reported that A7A5 processed around $1 billion daily by July and underpins a "sanctions evasion scheme" for Russian companies to make cross-border payments outside the traditional banking system. Chainalysis estimates its cumulative transaction volume exceeded $51 billion by July.

Key Takeaways:

• The U.S. government is intensifying its efforts to crack down on crypto-enabled sanctions evasion.
• Ruble-backed stablecoins and crypto exchanges are under increased scrutiny.
• The A7A5 network has been identified as a significant player in facilitating alternative payment rails for Russia.