Crypto Nightmare: Russian Operative Uses Tether To Fund War Machine

IAndrey Zverev, identified as a Russian operative in China, reportedly facilitated transactions on behalf of Kalashnikov Concern, Russia's leading small arms manufacturer.

What Happened: Using Tether USDT/USD, Zverev successfully transferred millions of dollars to secure electronic parts for drones—a key component in Russia’s arsenal against Ukrainian defenses, The Wall Street Journal reported.

Benzinga has reached out to Tether CEO Paolo Ardoino for a comment.

Kalashnikov, known globally for the AK-47 rifle, sought Zverev’s expertise in late 2022 to bypass international sanctions and procure critical drone components from a Hong Kong distributor.

Despite increasing efforts from the U.S. to thwart such transactions, Zverev leveraged Tether to complete the transaction discreetly.

This instance of cryptocurrency facilitating sanctioned trade is not isolated.

The report further stated that Tether was used to handle transactions totaling over $10 trillion in 2023 alone.

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The digital currency’s role in Russian trade, especially for acquiring dual-use goods crucial for military equipment, highlights a significant loophole in the enforcement of international sanctions.

The U.S. Treasury Department, acknowledging the loophole, has urged Congress to empower it with the authority to regulate transactions in U.S. dollar-denominated stablecoins like Tether.

This call to action came shortly after the department targeted a Moscow-based company for providing tether-based payment solutions to a sanctioned Russian bank, illustrating the urgency in addressing this regulatory gap.

Tether Holdings, the issuer of the stablecoin, has claimed to initiate a voluntary policy to freeze transactions linked to sanctioned entities.

Despite these measures, the utility of tether in circumventing sanctions remains a critical concern, with the U.S. Treasury underlining the increasing reliance on alternative payment mechanisms by Russia to sustain its military actions against Ukraine.

This account, based on interviews and Telegram chat messages among brokers and importers, provides a glimpse into the shadowy world of international trade where cryptocurrencies play a pivotal role.

What’s Next: The ongoing use of digital currencies like Tether in sanctioned trade will likely be a hot topic at Benzinga’s upcoming Future of Digital Assets conference, scheduled for Nov. 19, as industry experts grapple with the challenges of regulating digital assets while fostering innovation.

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