By
Chimamanda U. Martha
April 24th, 2024
The exchange Garantex previously declared its commitment to thwarting illegal acts and actively collaborating with European and US authorities until its sanctions designation.
The shadows cast by the Ukraine war extend to the world of cryptocurrency. Specifically, US and UK authorities are investigating over $20 billion from Garantex, a virtual currency platform based in Russia, for potential sanctions evasion, underscoring the conflict’s far-reaching implications.
A probe investigated transactions involving Tether (USDT), a cryptocurrency pegged to the US dollar, that passed through Garantex after the exchange faced sanctions from both American and British authorities in April 2022. The are concerns that Garantex facilitated illicit financial activities and crimes within Russia, prompting these sanctions.
The investigation highlights the constant difficulties Western nations encounter in curbing financial flows to Russia effectively. Despite wide-ranging sanctions, Russia has adroitly evaded restrictions through intricate offshore oil transfers, technology exchanges via third-party nations, and, as this case reveals, encrypted digital currency transactions masked in secrecy.
In this specific case involving $20 billion, the early-stage investigation reveals the complex and unclear nature of these digital asset transfers. Opaque by nature, these digital transactions poses challenges in determining the definitive purpose and origin of the substantial funds.
Tether, with over $100 billion in circulation, stands as the world’s most actively traded cryptocurrency. Notably, there exists no current allegation of misconduct against Tether Holdings Limited, the issuer of Tether. The company claims its dedication to openness, asserting complete trackability of all transactions and assets.
Garantex Faces Scrutiny over $100 Million Illicit Transactions
The exchange Garantex previously declared its commitment to thwarting illegal acts and actively collaborating with European and US authorities until its sanctions designation. Despite the ongoing inquiry, Garantex has remained silent. They persist in asserting cooperation with international law enforcement agencies and denying facilitation of criminal activities.
However, Garantex initially established operations in Estonia but later redirected the bulk of its activities to Moscow. Estonia revoked Garantex’s operating license in February 2022, coinciding with U.S. regulatory actions. The U.S. Treasury Department alleged that Garantex failed to comply with anti-money laundering and counter-terrorism financing regulations.
The Treasury traced Garantex’s transactions, totalling over $100 million, to illicit activities linked to the Russia-based Conti ransomware group, known for their malicious operations. Additionally, Garantex’s platform enables withdrawals via sanctioned Russian banks, and a Bloomberg-obtained image allegedly depicts a senior official discussing crypto-facilitated access to US dollars through intermediaries.
Tether’s Dual Nature Poses Vulnerability
Tether possesses a dual nature, presenting a complex scenario. Its utility facilitates investors’ seamless transition between tokens and exchanges. However, its anonymity, rapidity, and steadiness have also drawn the attention of criminals. Once funds are converted into Tether and transferred to anonymous wallets, they can be moved instantaneously, making it challenging to trace the source or recipient.
The rise of Tether’s usage in online fraud schemes, like “pig butchering”, and its widespread involvement in crypto-related crimes in 2023 based on TRM Labs’ analysis. This analysis reported that Tether facilitated $19.3 billion worth of illegal transactions in 2023, compared to $24.7 billion in the previous year.
Although Tether Holdings denies any complicity in facilitating illegal activities and claims cooperation with law enforcement agencies, the ongoing inquiry stresses the necessity for more stringent regulations. “With Tether, every action is online, every transaction is traceable, every asset can be seized, and every criminal can be caught,” the company said in its statement.