The US Department of Justice has announced criminal charges against the administrators of Russian cryptocurrency exchange Garantex, accusing them of facilitating money laundering and violating US sanctions. Aleksej Besciokov, a 46-year-old Lithuanian national and Russian resident, and Aleksandr Mira Serda, a 40-year-old Russian national residing in the United Arab Emirates, are alleged to have knowingly allowed criminal proceeds to be laundered through Garantex and took steps to conceal the facilitation of illegal activities on its platform.

According to the indictment, Garantex received hundreds of millions in criminal proceeds and was used to facilitate various crimes, including hacking, ransomware, terrorism, and drug trafficking. The exchange processed at least $96 billion in cryptocurrency transactions since 2019. Prosecutors accuse Besciokov of personally allowing transactions linked to cybercriminals, including the North Korean-government hackers known as Lazarus Group.

The announcement of the indictment came a day after the US Secret Service and a coalition of law enforcement agencies took down and seized the official websites of Garantex, replacing their contents with a banner featuring the agencies' logos and announcing the site's seizure. When TechCrunch reached out to three Garantex email addresses listed on its official page prior to the takedown, our emails were returned as undelivered. Garantex did not respond to multiple requests for comment through its official Telegram channel.

Besciokov and Mira Serda are both accused of a money laundering conspiracy, while Besciokov is also accused of conspiracy to violate sanctions and conspiracy, and of operating an unlicensed money transmitting business. Both face a maximum of 20 years in prison for the money laundering charge, while Besciokov faces another maximum sentence of 20 years for conspiracy to violate U.S. sanctions, and another maximum of five years for conspiracy to operate an unlicensed money transmitting business.

It's unclear if the two have been arrested. Shannon Shevlin, a spokesperson for the Department of Justice, told TechCrunch that the DOJ doesn't know if Mira Serda has been arrested in the UAE. The two charged Garatex administrators could not be reached by TechCrunch for comment.

U.S. prosecutors alleged that Besciokov and Mira Serda knew that their crypto exchange was used for money laundering and actively worked to make that happen even when Russian authorities asked questions. According to the DOJ, when Russian law enforcement requested records at some point related to a Mira Serda account on Garantex, the company provided incomplete information, and "claimed the account was not verified." In reality, Garantex had associated the account with Mira Serda's personal identifying documents, according to the indictment.

Millions in crypto seized, DOJ confirms. Garantex has been the focus of Western government action for several years. In 2022, as part of a series of actions against Russian cybercrime, the U.S. Treasury sanctioned Garantex, mentioning an analysis that showed that "over $100 million in transactions are associated with illicit actors and darknet markets, including nearly $6 million from Russian [Ransomware as a Service] gang Conti and also including approximately $2.6 million from [darknet market] Hydra."

Also, in 2024, as part of a series of sanctions against Russia for invading Ukraine, the European Union sanctioned Garantex, alleging the exchange is "closely associated with EU-sanctioned Russian banks." According to the DOJ, despite sanctions imposed by the U.S. government, Besciokov and his co-conspirators violated sanctions law by continuing to accept transactions with U.S.-based entities, and also "redesigned Garantex's operations to evade and violate U.S. sanctions and induce U.S. businesses to unwittingly transact with Garantex in violation of the sanctions."

The DOJ also said that U.S. law enforcement froze over $26 million in funds used to facilitate Garantex's money laundering. DOJ spokesperson Shevlin told TechCrunch that the department froze a total of 23,034,884.75 Tether and 35.57 Bitcoin on Binance (worth around $3 million as of Friday), amounting to about $26.2 million.

Even before these law enforcement actions, Garantex announced on Thursday that it had suspended "all services, including cryptocurrency withdrawals," after stablecoin issuer Tether blocked wallets belonging to Garantex that were holding more than $28 million. After the DOJ's announcement on Friday, Garantex posted an alert on Telegram about scammers "pretending to be the restored Garantex exchange or offering to withdraw funds."

The implications of this development are significant, as it highlights the ongoing struggle to combat money laundering and other illicit activities in the cryptocurrency space. The charges against Garantex's administrators serve as a warning to other cryptocurrency exchanges that may be facilitating illegal activities, and demonstrate the US government's commitment to cracking down on these activities.

The broader context of this development is also noteworthy. The increasing scrutiny of cryptocurrency exchanges by governments around the world is a trend that is likely to continue, as regulators seek to ensure that these platforms are not used for illegal activities. This development is also likely to have implications for the cryptocurrency market as a whole, as it may lead to increased regulation and oversight of exchanges.

In conclusion, the charges against Garantex's administrators mark a significant development in the ongoing efforts to combat money laundering and other illicit activities in the cryptocurrency space. As the cryptocurrency market continues to evolve, it is likely that we will see increased scrutiny of exchanges and other platforms, and a greater emphasis on ensuring that these platforms are not used for illegal activities.