Russian Crypto Exchange Garantex Evades Sanctions Through Decentralized network
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A Russian cryptocurrency exchange continues to flourish despite Western sanctions, relying on offshore financial hubs and other cryptocurrency platforms to transfer client funds, according to a new report from the Russian branch of Openness International.
The inquiry,published earlier this month,exposes the infrastructure underpinning Garantex,previously reported on by ICIJ,and Grinex,another cryptocurrency platform purported by the U.S. Treasury Department to be Garantex’s successor.
Garantex was sanctioned by the Treasury’s Office of Foreign Assets Control in 2022 for processing tens of millions of dollars in transactions linked to illicit activity. The exchange, registered in Estonia in 2019, facilitated money movement for a Russian ransomware-as-a-service operation and one of the world’s largest darknet marketplaces. Garantex also permitted a notorious cryptocurrency launderer to transfer money across international borders for Russian elites.
The report details how the sanctioned exchange has morphed into a decentralized money laundering system supported by two entities that have largely evaded scrutiny: Exved, a cross-border payment processing platform aimed at facilitating the import of dual-use goods into Russia, and Mkan coin, a Telegram-based crypto exchange operating out of Dubai that replicates Garantex’s core functions.
“Every time regulators cut off one ‘head’ of this crypto hydra, another appears under a new name,” the report’s author, Kristine Baghdasaryan, said in a news release. “Our findings show that Garantex did not disappear; it reorganised into a distributed system that hides crypto activity behind agency contracts, offshore legs, and Telegram-based workflows.”
Three years after the U.S. sanctioned Garantex, the European Union followed, citing its close associations with Russian banks. The U.S. Secret Service, the Department of Justice and an international group of law enforcement bodies seized Garantex’s digital infrastructure in March and the U.S. unsealed an indictment against its founders.
Garantex’s Legacy: How a Sanctioned Crypto Exchange Rebuilt as MKAN Coin
A Russian cryptocurrency exchange, Garantex, sanctioned by the U.S. government for facilitating financial transactions for illicit actors, hasn’t disappeared – it has rebranded and expanded its operations globally under the guise of MKAN Coin. New research from transparency International Russia reveals that MKAN Coin, a Telegram-based crypto-to-cash exchange, is essentially a continuation of Garantex’s money laundering operations, designed to circumvent sanctions and scrutiny. This network utilizes a decentralized structure and operates across multiple countries,including Kyrgyzstan,Spain,Brazil,Thailand,and Georgia.
The Finding of a Laundering Blueprint
The investigation began with the identification of a false Hong Kong-based exporter company linked to a cryptocurrency wallet address that received funds from a wallet associated with Garantex. This wallet processed over $112 million in transactions. Further investigation led researchers to a trove of leaked Garantex data – including emails, internal documents, chats, identity verification documents, invoices, and transaction logs – dating from 2021 to 2024.
This leaked material exposed the connection between Garantex and MKAN Coin. According to a report published by Transparency International Russia, MKAN Coin “inherited and rebranded Garantex’s laundering blueprint, extending it into a decentralized, global network designed to survive sanctions and scrutiny.” The report specifically identifies a former chief executive of Garantex as being behind the MKAN Coin brand.
How MKAN Coin Operates
Like Garantex, MKAN Coin facilitates the conversion of cryptocurrency to cash, enabling Russians to move money out of the country. However, MKAN Coin operates through Telegram, a messaging app known for its encryption and widespread use in Russia, making it more difficult to track and regulate.
“Crypto-to-cash through Telegram, to transfer money abroad, just like Garantex did,” explained Transparency International Russia researcher, Svetlana Baghdasaryan. This shift to a decentralized, Telegram-based model allows the network to operate with greater agility and evade international sanctions.
Garantex: A History of Sanctions and Illicit Activity
Garantex was sanctioned by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) in February 2022.The official proclamation stated that Garantex had facilitated transactions for ransomware groups, darknet marketplaces, and other illicit actors. OFAC specifically cited the exchange’s significant transaction volume with virtual currency wallets associated with the Russian darknet marketplace Hydra, which was jointly shut down by the U.S. and Germany in April 2022.
The sanctions aimed to disrupt Russia’s ability to evade financial restrictions imposed in response to the invasion of Ukraine. However, the emergence of MKAN Coin demonstrates the resilience and adaptability of those seeking to circumvent these measures.
global Reach and Implications
MKAN Coin’s presence in countries like Kyrgyzstan, Spain, Brazil, Thailand, and Georgia highlights the challenges of regulating cryptocurrency and preventing the flow of illicit funds across borders. The network’s decentralized nature and use of Telegram make it particularly difficult to track and disrupt.
This case underscores the need for increased international cooperation and the progress of more effective regulatory frameworks for cryptocurrency exchanges. It also highlights the importance of ongoing investigation and analysis to identify and disrupt networks that are actively working to evade sanctions and facilitate illicit financial activity.
Key Takeaways:
* Garantex Reborn: MKAN Coin is a rebranded continuation of the sanctioned Russian cryptocurrency exchange, Garantex.
* Telegram-Based: MKAN Coin operates primarily through Telegram, making it harder to track and regulate.
* Global Network: The network has established branches in multiple countries, including Spain, Brazil, and Thailand.
* Sanctions Evasion: MKAN Coin is designed to help Russians move money out of the country and evade international sanctions.
* Former Garantex Leadership: A former CEO of Garantex is reportedly behind the MKAN Coin brand.