Crypto firm shifted $4.2m assets to Russian-linked wallet

Analysis reveals connection between Copper Technologies and Jonatan Zimenkov, later sanctioned for Ukraine invasion

A cryptocurrency company transferred over $4.2m in digital assets to a crypto wallet associated with a member of an alleged Russian arms-dealing network. This individual was later sanctioned by the US. The transactions involving Copper Technologies raise concerns about whether UK crypto laws have kept pace with the sector’s rapid evolution and heightened scrutiny due to its potential anonymity.

Examination of crypto records by the Guardian and the International Consortium of Investigative Journalists (ICIJ) reveals a link between a major cryptocurrency firm and Jonatan Zimenkov, an Israeli-born Russian national.

Zimenkov, aged 29, faced US sanctions in February 2023 for his alleged involvement in aiding the Russian military during the Ukraine invasion. This was part of the “Zimenkov network,” an arms-dealing and sanctions evasion network led by his father, Igor Zimenkov.

Records indicate that Copper transferred millions of dollars’ worth of digital currency in May 2021 to a wallet later identified as belonging to Jonatan Zimenkov. However, sanctions were only imposed on him 19 months after the transaction. Copper, which enlisted former UK chancellor Philip Hammond as an adviser in October 2021, was initially based in London but has since relocated to Switzerland.

Although Zimenkov was not sanctioned at the time of the transfer, the US Treasury Department’s Office of Foreign Assets Control (OFAC) believes the network had been operational for several years before imposing restrictions on 22 individuals and entities across various countries.

The citation stated that the Zimenkov network engaged in various transactions, including Russian cybersecurity and helicopter sales overseas, as well as endeavors to provide weapons to an undisclosed African nation.

There is no indication that Copper violated any sanctions or regulations in effect at the time of the transaction.

However, this disclosure highlights the opaque nature of cryptocurrency and the anonymity it can provide. It also raises questions about how digital assets and their transactions should be regulated within the broader financial system.

A spokesperson for Copper stated, “Copper takes its compliance, legal, and regulatory obligations very seriously and has consistently complied with all relevant regulatory standards, including sanctions prohibitions, in the UK.”

The Guardian and ICIJ have learned that Zimenkov was not a client of Copper, meaning the company was not obligated to verify his identity. The company did not respond to specific inquiries regarding its association with Zimenkov.

Financial institutions have the choice to submit a suspicious activity report (SAR) if a transaction raises concerns, even if it does not clearly violate regulations. It is unclear whether Copper filed a SAR, which must be forwarded to a law enforcement agency like the UK’s National Crime Agency.

In 2020, the finance industry’s joint money laundering steering group issued guidance suggesting that crypto firms should collect information about transfer recipients to evaluate potential risks, considering it “good practice.”

However, it wasn’t until late 2023 that the UK also adopted a travel rule, requiring crypto companies to verify funds transferred to external parties, following regulatory concerns about overlooked risks.

Transfers of digital currencies like bitcoin and ethereum are recorded on a blockchain, the underlying digital ledger of the cryptocurrency ecosystem. While these transactions are logged, they can also provide anonymity to individuals seeking to conceal financial relationships, as funds are stored in online wallets not necessarily linked to the holder’s identity.

Blockchain records indicate that Copper transferred more than 1,700 units of ethereum, valued at over $4.2m at the time, to Jonatan Zimenkov in May 2021. These transfers were conducted in two transactions on the same day, according to data from the blockchain analytics platform Etherscan.

The purpose of these transactions and the origin of the digital assets remain unclear. Zimenkov did not respond to requests for comment.

The recipient of the ethereum transactions is not identified by name in the blockchain records; only their digital currency address, consisting of a combination of letters and numbers, is shown.

This same address was cited in a February 2023 announcement by the US Treasury regarding sanctions imposed on the Zimenkov network.

The US disclosures regarding the alleged Zimenkov sanctions evasion network underscore the potential importance of verifying the identities of individuals involved in such asset transfers.

Jonatan Zimenkov, holding Russian, Israeli, and Italian citizenship, was linked to the address by US authorities. Records indicate he studied in London, as per a private school brochure.

He was identified by the US government as part of a “sanctions evasion network” active over several years. His father was accused of leading the alleged arms-dealing network.

The Treasury stated the Zimenkovs supported Russian defence exporters Rosoboronexport and Rostec, both under sanctions, by supplying high-tech devices after Russia’s invasion of Ukraine.

Igor Zimenkov collaborated closely with his son and others to facilitate Russian defense sales to third countries, as per the US Treasury. Jonatan Zimenkov held power of attorney for network companies on his father’s behalf.

The Zimenkovs allegedly communicated with sanctioned Russian defense firms and engaged in various deals for Russian cybersecurity and helicopter sales abroad.

Sanctions target companies involved in the arms trade, including GBD Limited, a “Zimenkov network company” attempting to supply weapons to an African government. Records show Jonatan Zimenkov registered as an “individual entrepreneur” in Russia in 2019, involved in wholesale trade of ships, aircraft, and vehicles.

The Guardian previously reported Copper Technologies’ involvement in a share sale benefiting a sanctioned Russian banker, worth over $19m.