By The Council of the European Union added Russian cryptocurrency exchange Garantex to their latest sanctions package last week for being “closely associated with EU-sanctioned Russian banks,” marking the council’s first time sanctioning a crypto exchange.
The sanctions to Garantex– which the U.S. already sanctioned in April 2022– come nearly a year after an investigation by Eesti Ekspress and the International Consortium of Investigative Journalists found that a firm with multiple connections to Garantex co-owns a debt-collection business with a convicted gang leader and has ties to Rosneft, the Kremlin-tied oil firm.
“This package continues targeting actors responsible for circumventing EU sanctions, including through third countries,” the EU announcement reads. “The European Union remains ready to step up pressure on Russia.”
Originally registered in Estonia as Garantex Europe, Garantex was founded in 2019 by Stanislav Drugalev, a Russian tech specialist, and Sergey Mendeleev, a local politician in Moscow; Aleksandr Ntifo-Siao, the company’s commercial director, co-owned the company.
Garantex became the largest crypto currency exchange in Russia, with offices at one point in one of Moscow’s top business locations, the Federation Tower skyscrapers. The company found a niche as a way to convert rubles into other currencies, which became more difficult after the invasion of Ukraine amid sanctions on Russian banks and Moscow’s own capital controls.
Garantex also allows people to use cryptocurrencies to make foreign transfers. Customers deposit rubles in cash at Garantex’s offices to receive the equivalent value in a cryptocurrency, which then is exchanged with a traditional currency. With cryptocurrencies, the transactions themselves are visible on a public ledger, known as a blockchain, but the parties’ identities are shielded.
ICIJ’s 2024 investigation revealed that within weeks of one of the exchange’s three founding shareholders dying under suspicious circumstances, another was replaced in corporate records by a shareholder linked to Rosneft.
Based on court and corporate records and a review of transactions on the Garantex exchange, the investigation also found that Garantex– which had been sanctioned for moving money for criminals and later associated with a terror group close to Hamas – was used by other designated terror groups, including Hezbollah, as well as drug gangs in Ukraine and other criminal actors.
In a statement to ICIJ in 2024, Garantex declined to comment on its corporate structure or its affiliate’s Russian government and criminal ties.
Garantex said it seeks to prevent the use of the exchange for illicit activities and actively cooperated with European and U.S. authorities until the U.S. imposed sanctions on the exchange in April 2022. The company said it still cooperates with other international law enforcement agencies.
“Not only do we stay away from facilitating criminal financial activities, but we also do our best to help prevent them, particularly by trying to initiate a revival of cross-border cooperation aimed at investigating and preventing illicit transactions,” the statement said.
