Authorities target Russian criminal gangs who used crypto to move cash
Summary
The groups worked with money launderers to convert bulk deliveries of cash into cryptocurrencies for clients, U.S. and U.K. law enforcement agencies said.
U.S. and U.K. authorities on Wednesday targeted a money-laundering network that they said enabled Russian elites to evade international sanctions through the use of cryptocurrency, particularly the stablecoin tether.
The Wall Street Journal chronicled one of the network’s leaders, a glamorous Russian businesswoman called Ekaterina Zhdanova, in an article earlier this year about tether’s emergence as a favored tool of the financial underworld.
The U.S. Treasury Department said Zhdanova’s organization, called Smart Group, worked with other money launderers to convert bulk deliveries of cash into cryptocurrencies for clients. It said Russian members of the network sent tether to digital wallet addresses she controlled. Zhdanova also helped one member conceal the source of their funds to buy property in the U.K., said Treasury, which sanctioned five people in the network in addition to Zhdanova, who was blacklisted last year.
A lawyer for Zhdanova declined to comment.
“Russian elites sought to exploit digital assets—in particular U.S. dollar-backed stablecoins—to evade U.S. and international sanctions, further enriching themselves and the Kremlin," said Bradley Smith, Treasury’s acting undersecretary for terrorism and financial intelligence.
Tether operates the world’s most transacted cryptocurrency, known as a stablecoin for its 1:1 backing with the dollar. It is essentially a digital dollar, though unlike government-issued currencies that flow through regulated banks, its transactions are largely hidden from governments.
U.S. federal investigators are separately investigating tether’s issuer, British Virgin Islands-registered Tether Holdings, for allegedly violating financial crime laws, the Journal reported in October. At the time the company denied it was involved in aiding criminal actors and said it cooperated with law enforcement. Wednesday’s actions by U.S. and U.K. officials didn’t target Tether directly.
A Tether spokesperson didn’t immediately respond to comment about the authorities’ actions.
Zhdanova told associates in messages on Telegram in 2022 and 2023 that she was arranging huge ruble-for-tether deals for clients, sharing digital wallets that had transferred over $350 million in the stablecoin, the Journal previously reported.
She had high-level connections in Russia: Her ex-husband was a top lieutenant for a billionaire Russian real-estate developer, and Treasury has accused her of moving money on behalf of unnamed oligarchs. The 38-year-old, who posed on social media bedecked in luxury fashion labels, once ran a travel agency that organized luxury cruises, along with a chain of boutique Moscow hotels.
Zhdanova is in custody in France where police detained her in late 2023 as part of a separate French money-laundering investigation.
The U.K.’s National Crime Agency, which collaborated with Treasury, said Zhdanova’s Smart Group helped fund Russian espionage operations and laundered money for other criminal groups including the Kinahan cartel, an Irish drug-trafficking gang whose members were already under U.S. sanctions.
The NCA said a London-based cash courier network directed by Zhdanova laundered over 15 million pounds, equivalent to $19 million, in illicit funds, with cash handovers taking place in dozens of locations across Britain. It said law enforcement agencies have made 84 arrests in relation to Smart Group and another similar network.
The NCA found that street-level cash deliveries were followed almost immediately by a movement of crypto of the same value. Criminal gangs then used crypto to buy drugs and guns without needing to move any physical money across borders, the NCA said.
Write to Angus Berwick at angus.berwick@wsj.com
