A group of journalists claim that blockchain hubs in Estonia and Lithuania are channeling funds for Russians.
Crypto exchanges in two EU countries, Estonia and Lithuania, have helped Russians circumvent Western sanctions and been instrumental in the laundering of more than €1 billion in assets, according to an investigation by a group of international journalists.
The report was published on VSquare's website on Wednesday, and it 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.
The report notes that Estonia has become a global hub for crypto companies due to its liberal crypto licensing system, which has been implemented in 2017 by a number of leading crypto companies. As of mid-2021, nearly 55% of the world's virtual currency service providers were registered in the country, flocking there to achieve the prestigious status of being an EU-registered firm.
The EU's legalization became a selling point for international fraudsters who used the jurisdiction to inject trust into their illegal operations, it said.
They also found cases of sanctions evasion, the report said. The Russians were removed from many international financial instruments by Western sanctions following the beginning of the Ukraine conflict last year. Russian banks were separated from the SWIFT interbank messaging system, which virtually deprived them of the ability to transfer funds globally. Crypto was an alternative for cross-border transactions and near-total anonymity, which many used to their advantage.
For example, the Russian private military group Rusich, a Russian military group, was found to have used nine cryptocurrency wallets in Estonia to raise at least $210,000 between 2022 and 2023. The Coinsbit platform in Estonia has reportedly allowed users to convert Russian rubles into Bitcoin. MEXC, a crypto exchange, has said that it offers ruble payments via its P2P mechanism. Payeer, a renowned cryptocurrency exchange and payment processor, has published videos demonstrating how to bypass Western financial sanctions using the platform.
By 2022, Estonia tightened its anti-money laundering laws to flush out illegal crypto financers from its market, and over 1,500 crypto companies lost their licenses, the report said. In 2019, many of these firms were reportedly moved to neighboring Lithuania, which currently has more than 800 virtual assets firms, up from only 20 in 2019.
The investigation found links between one of these crypto firms and Russia's largest lender, Sber. MoneySwap OÜ, which operated the virtual assets platform Mercuryo, moved to Lithuania in 2022 as MoneyAmber UAB. The shares of MRCR Holdings, a Cypriot company, are managed by a Cypriot firm, which includes Akshin Dzhangirov, the brother of Sber's chief risk officer, Dzhangir Dzhangirov. The report did not disclose whether the brothers were involved in sanctions evasion schemes, but highlighted that in 2021, Akshin received about $300,000 in income from Sber.