Crypto company transferred assets worth $4.2mn to Russian arms dealer
Copper Technologies, a cryptocurrency company, moved over $4.2 million in digital assets to a wallet connected to Jonatan Zimenkov, a member of an alleged Russian arms-dealing network. The connection was discovered by the Guardian and the International Consortium of Investigative Journalists (ICIJ). Zimenkov, a Russian national born in Israel, faced US sanctions in February 2023 for supposedly helping the Russian military during the Ukraine invasion.
Copper Technologies' connection to Zimenkov
In May 2021, Copper transferred over 1,700 units of Ethereum, worth $4.2 million to a wallet connected to Zimenkov. The company, which hired former UK Chancellor Philip Hammond as an adviser in October 2021, was based in London during the transfer but has since relocated to Switzerland. A Copper spokesperson said, "Copper takes its compliance, legal and regulatory obligations very seriously, and has acted in full compliance with all applicable regulatory standards, including all applicable sanctions prohibitions, in the UK."
Anonymity and regulation concerns in cryptocurrency
This news sparks questions about cryptocurrency anonymity and how digital assets and transactions should be regulated within the broader financial system. Although Zimenkov wasn't a Copper client and the firm had no regulatory duty to verify his identity, financial companies can choose to file a suspicious activity report (SAR) if a transaction seems suspicious. It's unclear if Copper filed a SAR with an organization like the UK's National Crime Agency.
UK adopts travel rule for crypto companies
In 2023, the UK mandated a travel rule, requiring crypto companies to conduct checks on funds sent to external parties, after regulators expressed concerns about overlooked risks. Digital currency transfers, such as Bitcoin and Ethereum, are recorded on a blockchain, offering anonymity to those trying to hide financial connections since online wallets don't need to be linked to the owner's identity.
US sanctions against the Zimenkov network
Back in the US, the Treasury Department's Office of Foreign Assets Control (OFAC) sanctioned 22 individuals and entities across multiple countries. These include Zimenkov and his father, Igor, for their alleged involvement in an arms-dealing and sanctions evasion network. The Zimenkov network is accused of participating in projects related to Russian defense capabilities, delivering high-tech devices to a Russian company post-Ukraine invasion, and attempting to supply weapons to an unnamed African country.
