In an investigation of the Estonian FIU, it was revealed that Garantex Europe OÜ, an Estonian licensed crypto payment processor founded and controlled by Russians, processed Russian money. Allegedly over €5 billion annually. The regulatory investigation confirmed suspicions that it was essentially a Russian venture. The Estonian FIU identified significant deficiencies in the company’s KYC/AML procedures, leading to the surrender of its crypto license in February 2022.
Related Individuals and Legal Entities:
- Sergey Mendeleev: Founder of Garantex. He also co-founded InDeFi SmartBank with Russian oligarch Alexander Lebedev.
- Stansilav Drugalev: Co-founder of Garantex. He tragically died under mysterious circumstances in Dubai.
- Raul Pint: Nominee director of Garantex.
- Other Notable Individuals: Pier Kampor, Evgenia Burova, Vladimir Yelenskiy, Vladislav Rychagov, and Aleksandr Ntifo-Siao.
- Legal Entities: Kihonzi Buzhaga OÜ (previously Garantex Europe OÜ), Tradingair OÜ, and Legalexpert OÜ.
The Garantex Narrative:
Launched in 2019, Garantex is by far the most popular crypto exchange in Russia for ruble trading. With offices in Moscow and Saint Petersburg, Garantex was among the companies that lost their Estonian license due to money laundering activities. Despite facing sanctions, Garantex continued its operations, with the U.S. Treasury Department linking over $100 billion of its transactions to illegal activities. Notably, $6 million was associated with the Russian hacking group Conti, known for ransomware attacks.
Furthermore, Garantex played a role in channeling funds to Russitsch, a Russian neo-Nazi mercenary group involved in the conflict in Ukraine. This group has been soliciting donations via cryptocurrencies, highlighting the urgent need for robust regulations in the crypto sector.
Legal and Regulatory Issues:
The Estonian FIU investigations revealed that Garantex Europe had several weaknesses in preventing money laundering and terrorist financing. The company failed to notify the FIU of suspicious transactions consistently. Funds processed via Garantex Europe were found to be related to crime or wallets used by criminal offenders for illegal purposes.
In April 2022, the U.S. Department of Treasury sanctioned Garantex for ransomware activities for Russian gangs and added it to the OFAC‘s SDN list. Treasury assessed that wealthy Russian individuals often used Garantex to move money out of the country.
Current Status
Despite losing its Estonian license and facing U.S. sanctions, Garantex remains operational. The company has shifted most of its operations to Moscow and continues to attract a significant user base. The U.S. Treasury Department has linked a substantial portion of Garantex’s transactions to illicit actors and darknet markets.
Conclusion
Garantex, with its ties to Russia and operations in Estonia, has become a focal point in the ongoing discussions about cryptocurrency regulations and the potential for misuse. The company’s ability to continue operations despite facing sanctions and regulatory scrutiny underscores the challenges regulators face in overseeing the rapidly evolving crypto industry.
