Question: Should Not All Or Some Of The US$5,379,876.94 Seized By The DOJ Reimburse First United States Taxpayers For The More Than US$113.1 Billion Borrowed Thus Far To Support Ukraine?
Question: Should Not All Or Some Of The US$5,379,876.94 Reimburse First United States Taxpayers For The More Than US$113.1 Billion Borrowed Thus Far To Support Ukraine?
The United States Department Of Justice Transferred To The United States Department Of State US$5,379,876.94 Million Seized From A Russian National, Konstantin Malofeyev. The Funds Are To Be Used To Support Ukraine.
The Funds Were Seized Due To A Decision By The United States District Court In The Southern District Of New York State For Violations Of United States Statutes (Including The 1977 International Emergency Economic Powers Act- IEEPA) And Regulations Including Those Of The Office Of Foreign Assets Control (OFAC) Of The United States Department Of The Treasury.
Mr. Malofeyev Was Charged With Violations Of United States Laws And Regulations And Prosecuted Using United States Taxpayer Resources.
Since 24 February 2022, governments of approximately fifty (50) countries have provided (directly and indirectly) approximately US$200+ billion in taxpayer funds (with some including the Biden-Harris Administration (2021- ) borrowing on behalf of their taxpayers) to provide commercial, economic, financial, humanitarian, military, and political support for Ukraine.
Since 24 February 2022, there remains frozen approximately US$340 billion in Central Bank of the Russian Federation (CBRF) assets which earn at least approximately US$9.3 billion in interest (2%) annually- US$566.6 million per month, US$18.8 million per day.
Among countries reported holding CBRF assets: France (US$74 billion), Japan (US$58 billion), Germany (US$55 billion), United States (US$38 billion), United Kingdom (US$31 billion), Austria (US$17 billion), Switzerland (US$8.3 billion) and Canada (US$16 billion) among other countries.
“We, the G7 Foreign Ministers of Canada, France, Germany, Italy, Japan, the United Kingdom (U.K.) and the United States of America (U.S.), and the High Representative of the European Union, underline our strong sense of unity as the world navigates grave threats to the international system, including Russia’s continued war of aggression against Ukraine. We are determined, consistent with our respective legal systems, that Russia’s sovereign assets in our jurisdictions will remain immobilized until there is a resolution of the conflict that addresses Russia’s violation of Ukraine’s sovereignty and territorial integrity. Any resolution to the conflict must ensure Russia pays for the damage it has caused.” Emphasis added.
Mr. Dimitry Peskov, spokesperson for the government of the Russian Federation, shared that confiscation and use of assets of the government of the Russian Federation for benefit of Ukraine would be “illegal, blatant, and of course requiring an appropriate response... It would be, in fact, outright theft.” Emphasis added.
On 24 February 2022, the armed forces of the Russian Federation invaded and further invaded the territory of Ukraine in what President Putin defined as a Special Military Operation [SMO] then on 22 December 2022 redefined as a war. The initial invasion by the armed forces of the Russian Federation was in part from the territory of the Republic of Belarus.
The war between the Russian Federation and Ukraine did not commence on 24 February 2022. The roots began their trajectories on 20 February 2014 when the armed forces of the Russian Federation invaded the Crimean Peninsula and the area known as the Donbas Region (Donetsk Oblast and Luhansk Oblast).
Reuters (10 May 2023): The United States has for the first time transferred millions seized from a Russian oligarch to a fund for rebuilding Ukraine, the Justice Department announced Wednesday. Some $5.4 million seized from Russian tycoon Konstantin Malofeyev was handed over to the State Department to be used to "remediate the harms of Russia's unjust war," Attorney General Merrick Garland said in a statement. Malofeyev, who built his fortune in banking, telecommunications and media, was indicted in April 2022 for violating sanctions related to the 2014 Russian-backed secession war in Ukraine's Donbas region and its takeover of Crimea. The United States said Malofeyev was a main source of funding for pro-Russian separatists in eastern Ukraine. Along with that indictment, the U.S. government took control of $5.4 million in Malofeyev's assets, mainly an investment he had made into a Texas bank. The United States has ordered the seizure of several Russian tycoons' assets related to Russia's 2014 actions and the 2022 invasion of Ukraine. "While this represents the United States' first transfer of forfeited Russian funds for the rebuilding of Ukraine, it will not be the last," said Garland.
“According to the 2022 Sealed Indictment filed in the United States District Court in the Southern District of New York, El Paso, Texas-based Strategic Growth Bancorp, recognized Mr. Malofeyev as the owner of the original shares and flagged the attempted transfer to the Treasury Department. Mr. Malofeyev's shares were later converted into cash and deposited into a blocked account when Strategic Growth Bancorp merged with Denver, Colorado-based Sunflower Bank. Neither Strategic Growth Bancorp nor Sunflower Bank was accused of wrongdoing.”
Reuters (2 February 2023): U.S. prosecutors may confiscate $5.4 million belonging to sanctioned Russian businessman Konstantin Malofeyev, a judge ruled on Thursday, paving the way for the funds to potentially be used to help rebuild war-ravaged Ukraine. The ruling by U.S. District Judge Paul Gardephe in Manhattan federal court marked the first forfeiture order for a Russian oligarch's assets since the Department of Justice in 2022 launched a task force aimed at squeezing the finances of Russian President Vladimir Putin's allies in response to the Ukraine invasion. U.S. President Joe Biden in late 2022 signed a law allowing the DOJ to transfer some forfeited assets to the State Department to aid Ukraine. U.S. law limits how the government may use forfeited assets. U.S. authorities have accused Malofeyev, the owner of Christian Orthodox television channel Tsargrad TV, of financing separatists in Crimea, which Russia annexed in 2014. Malofeyev, who has denied financing separatists, was sanctioned by Washington in 2014 and charged with sanctions violations in 2022. He could not be reached for comment and is believed to be at large in Russia. Andrew Adams, head of the DOJ's KleptoCapture task force, said last month that the first forfeited funds could be transferred to Ukraine shortly. "These amounts are miniscule compared to the cost of the catastrophe inflicted by Russia on the people and the land of Ukraine, but the contribution is important," Adams said in a speech to the Hudson Institute, a Washington, D.C. think tank. Moscow calls its activities in Ukraine a "special military operation."
Prosecutors said in court papers late last year they were entitled to the money in Malofeyev's account at Denver-based Sunflower Bank because he sought to transfer it to a business partner in violation of U.S. sanctions. Since Malofeyev did not contest the forfeiture request, prosecutors said on Thursday the funds should be forfeited by default. The KleptoCapture task force has temporarily seized other oligarchs' assets, including a $300 million yacht, but has not yet won orders to permanently forfeit them.
Department of Justice
Office of Public Affairs
Washington DC
6 April 2022
Russian Oligarch Charged with Violating U.S. Sanctions
Defendant Hired American Citizen Jack Hanick to Work for His Television Network in Russia and Illegally Transferred $10 Million U.S. Investment to Business Associate
A Russian national is charged with violating U.S. sanctions arising from the 2014 Russian undermining of democratic processes and institutions in Ukraine.
According to the indictment, which was unsealed today in the Southern District of New York, Konstantin Malofeyev, 47, of Russia, is charged with conspiracy to violate U.S. sanctions and violations of U.S. sanctions in connection with his hiring of an American citizen, Jack Hanick, to work for him in operating television networks in Russia and Greece and attempting to acquire a television network in Bulgaria. As alleged, Malofeyev also conspired with Hanick and others to illegally transfer a $10 million investment that Malofeyev made in a U.S. bank to a business associate in Greece, in violation of the sanctions blocking Malofeyev’s assets from being transferred. Along with the indictment, the United States issued a seizure warrant for Malofeyev’s U.S. investment. Malofeyev remains at large and is believed to be in Russia.
“The Justice Department will work relentlessly to counter Russian aggression, including by enforcing U.S. sanctions law,” said Assistant Attorney General Matthew G. Olsen of the Justice Department’s National Security Division. “As alleged in the indictment, Konstantin Malofeyev is a Russian oligarch who has been sanctioned since 2014 for threatening Ukraine and providing financial support to the Donetsk separatist region. Malofeyev knowingly violated U.S. sanctions by paying for services of a U.S. person and by seeking to transfer money that had been invested in the United States.”
“Konstantin Malofeyev is closely tied to Russian aggression in Ukraine, having been determined by OFAC to have been one of the main sources of financing for the promotion of Russia-aligned separatist groups operating in the sovereign nation of Ukraine,” said U.S. Attorney Damian Williams for the Southern District of New York. “The United States sanctions on Malofeyev prohibit him from paying or receiving services from United States citizens, or from conducting transactions with his property in the United States. But as alleged, he systematically flouted those restrictions for years after being sanctioned. The indictment unsealed today shows this office’s commitment to the enforcement of laws intended to hamstring those who would use their wealth to undermine fundamental democratic processes. This office will continue to be a leader in the Justice Department’s work to hold accountable actors who would support flagrant and unjustified acts of war.”
“The allegations in this case go back many years showing just how much effort the FBI and its partners put into investigating these crimes,” said Assistant Director Alan E. Kohler Jr. of the FBI’s Counterintelligence Division. “According to the indictment, the defendant used shell companies and other means to hide his deceptions and evade important sanctions meant to ensure the territorial integrity of Ukraine. While this case is about violating sanctions, it’s also about bringing people to justice who think they can violate our laws with impunity.”
“Kremlin-linked Russian oligarch Konstantin Malofeyev played a leading role in supporting Russia’s 2014 invasion of eastern Ukraine, continues to run a pro-Putin propaganda network, and recently described Russia’s 2022 military invasion of Ukraine as a ‘holy war,’” said Assistant Director Michael J. Driscoll of the FBI’s New York Field Office. “The FBI works tirelessly to protect our national interests, and we will continue to use all the resources at our disposal to aggressively counter Russia’s malign activity around the world.”
According to court documents, in 2014, the President issued Executive Order 13660, which declared a national emergency with respect to the situation in Ukraine. To address this national emergency, the President blocked all property and interest in property that came within the United States or the possession or control of any U.S. person, of individuals determined by the Secretary of the Treasury to be responsible for or complicit in actions or policies that threatened the peace, security, stability, sovereignty or territorial integrity of Ukraine, or who materially assist, sponsor or provide financial, material or technological support for, or goods and services to, individuals or entities engaging in such activities.
Executive Order 13660, along with certain regulations issued pursuant to it (the Ukraine-Related Sanctions Regulations) prohibits, among other things, making or receiving any funds, goods or services by, to, from or for the benefit of any person whose property and interests in property are blocked.
On Dec. 19, 2014, the Department of Treasury’s Office of Foreign Assets Control (OFAC) designated Konstantin Malofeyev as a Specially Designated National (SDN) pursuant to Executive Order 13660. OFAC’s designation of Malofeyev explained that he was one of the main sources of financing for Russians promoting separatism in Crimea, and has materially assisted, sponsored, and provided financial, material, or technological support for, or goods and services to or in support of the so-called Donetsk People’s Republic, a separatist organization in the Ukrainian region of Donetsk.
As alleged in the indictment, Malofeyev hired a U.S. citizen named Jack Hanick in 2013 to work on a new Russian cable television news network (the Russian TV Network) that Malofeyev was creating. Malofeyev negotiated directly with Hanick regarding Hanick’s salary, payment for Hanick’s housing in Moscow, and Hanick’s Russian work visa, and Malofeyev paid Hanick through two separate Russian entities through the end of 2018.
After OFAC designated Malofeyev as a SDN in December 2014, Malofeyev continued to employ Hanick on the Russian TV Network, in violation of the Ukraine-Related Sanctions Regulations. Malofeyev also dispatched Hanick to work on a project to establish and run a Greek television network and on efforts to acquire a Bulgarian television network. At Malofeyev’s direction, Hanick traveled to Greece and to Bulgaria on multiple occasions in 2015 and 2016 to work on these initiatives and reported directly back to Malofeyev on his work. For instance, in November 2015, Hanick wrote to Malofeyev that the Greek television network would be an “opportunity to detail Russia’s point of view on Greek TV.” In connection with Malofeyev’s efforts to acquire the Bulgarian television network, Malofeyev instructed Hanick to take steps to conceal Malofeyev’s role in the acquisition by conducting the negotiations through a Greek associate of Malofeyev (the Greek Business Associate), so that it would appear the buyer was a Greek national rather than Malofeyev.
Malofeyev also employed Hanick to assist Malofeyev in transferring a $10 million investment in a Texas-based bank holding company (the Texas Bank) to the Greek Business Associate in violation of the Ukraine-Related Sanctions Regulations. In 2014, Malofeyev used a shell company to make the investment, and beginning in or about March 2015, Malofeyev began making plans to transfer ownership of the shell company to the Greek Business Associate as a means to transfer the investment in the Texas Bank. In or about May 2015, Malofeyev’s attorney drafted a Sale and Purchase Agreement that purported to transfer the shell company to the Greek Business Associate in exchange for one U.S. dollar. In June 2015 Malofeyev had Hanick physically transport a copy of Malofeyev’s certificate of shares in the Texas Bank from Moscow to Athens to be given to the Greek Business Associate. Malofeyev signed the Sale and Purchase Agreement in June 2015, but the agreement was fraudulently backdated to July 2014 to make it appear that the transfer had taken place prior to the imposition of U.S. sanctions. Malofeyev’s attorney then falsely represented to the Texas Bank that the transfer had taken place in July 2014, even though Malofeyev and his attorney well knew that the transfer of the shell company was executed in June 2015.
Along with the unsealed indictment, a seizure warrant was issued in the Southern District of New York for Malofeyev’s Texas Bank investment, which had been converted by the Texas Bank in 2016 to cash held in a blocked U.S. bank account. The United States recovered those funds pursuant to the warrant and will seek forfeiture of those funds as property that constitutes or is derived from proceeds traceable to the commission of the offenses alleged in the indictment.
Each of the two sanctions charges in the indictment carry a maximum penalty of 20 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
The FBI is investigating the case, with valuable assistance provided by the Justice Department’s National Security Division and Office of International Affairs.
Assistant U.S. Attorneys Thane Rehn, Jessica Greenwood, and Vladislav Vainberg for the Southern District of New York are prosecuting the case, with valuable assistance provided by Trial Attorney Nathan Swinton of the National Security Division’s Counterintelligence and Export Control Section.
LINKS To Court Documents
Summons In A Civil Action (4/28/23)
Government’s Forfeiture Bill Of Particulars (6/15/22)
Superseding Sealed Indictment (4/5/22)
LINKS To Related Analyses
