Organized crime: Estonia’s crypto gangsters in the gold rush
by Hannes Munzinger and Anastasia Trenkler
October 4, 2023 | 9:38 Estonia is the digital Eldorado of Europe. For years, the small state has attracted cryptoentrepreneurs. They also came to launder money. Russian hackers, fraudsters and mercenaries profited from crypto platforms in Estonia: members of the Russian right-wing extremist unit “Russitsch” on Red Square in Moscow. (File image) Source: imago/NurPhoto
Until recently, Sergei B. was managing director of 24 companies. The man from a town in eastern Estonia was a serial entrepreneur in the cryptocurrency business. Millions flowed through his company accounts. But, according to him, Estonia is “a country that prevents people from making money”. B. has more than ten years of professional experience in banking and finance, according to his LinkedIn profile. Today he is unemployed.
In fact, B. is a plumber, the legend of the financial expert is fictional. Created by men whose names he does not want to mention, who hired him as a scarecrow and turned the plumber into a supposed financial expert.
US authorities sanctioned Estonian crypto portal
The crypto-plumber is just one of many straw men who enlist the help of shady financial jugglers from around the world to launder dirty money in Estonia. Since 2017, the country has attracted companies that exchange cryptocurrencies or process payments with fast-track licenses. More than 2,000 licenses have been issued and suppliers around the world have made use of them.
But there were also those that were not wanted: companies like those where plumber B. officially served as general director. For example, “Izbits OÜ”, which was connected to the Chatex virtual crypto exchange and has now been sanctioned by US authorities. The US Treasury Department’s rationale states:
Known Chatex transactions show that more than half can be directly attributed to illegal or high-risk activities such as darknet markets, high-risk exchanges, and ransomware.
US Treasury Department
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Two-thirds of all licenses were revoked
Just three years later, the financial regulator had to take drastic action and confiscate two-thirds of all licenses. Supervisors discovered that many companies had only been registered for fraud and registered their licenses for fraudulent transactions. The country’s top anti-money laundering official warned that the crypto license business must be stopped and restarted. In 2022, Parliament strengthened the law against money laundering and terrorist financing and another 400 companies lost their commercial base.
Ransomware blackmailers are said to have used the stock exchange
This included cryptocurrency exchange Garantex, which had operated in Moscow and St. Petersburg since 2019 but was licensed in Estonia. Customers can deposit traditional money into Garantex and exchange it for Bitcoin, Ethereum, Monero or other blockchain currencies. The US sanctioned the exchange in April 2022.
The US Treasury Department managed to link more than $100 million in Garantex transactions to “illegal actors and darknet markets.” They attributed six million of them to the notorious pro-Russian hacker group “Conti”. Conti is known for so-called ransomware attacks, in which victims’ systems are encrypted and only decrypted after the ransom is paid. Ransom money, which reached the blackmailers thanks to Garantex.
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Neo-Nazi mercenaries with connections to the Wagner troupe
The Russian neo-Nazi mercenary group “Russitsch” also received funds through Garantex. It fought in Donbass in 2014 and 2015. It has been involved in the war of aggression against Ukraine since spring 2022 at the latest. Its founder, Alexei Milchakov, is a right-wing extremist from Saint Petersburg. He is said to have ties to the “Wagner” mercenary group.
“Russitsch” fighters are known for their brutal actions. On his Telegram channel, “Russitsch” shares photos of soldiers posing with dead bodies – one leg resting on lifeless heads. They publish videos of shootings and nukes fired near groups of people.
In the meantime, there are always requests for donations: camouflage jackets, drones, communications technology and evacuation vehicles. Backers can transfer money directly to Russian institutions such as Sperbank or Alfa Bank. Or they just use cryptocurrency.
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Making money from dead Ukrainians
All wallet addresses are listed in the respective Telegram messages, regardless of whether they are Bitcoin, Ethereum, Tether or Monero. You are flexible. ZDF was able to track the payments to “Russitsch” with the help of the Organized Crime and Corruption Reporting Project (OCCRP) and the Estonian investigative platform Delfi. In total, the mercenaries raised more than US$211,000. At least $10,000 flowed between “Russitsch” and Garantex. They regularly inform their fans on Telegram that the money is going to right-wing extremists – and solemnly swear their unlimited solidarity.
But they don’t stop there: in the meantime, they say they have circulated instructions on their Telegram channel that explain how Russian fighters can make money from the bodies of murdered Ukrainians: “Take photos that show their faces and offer information to relatives about their place of burial of the son or husband worth two to five thousand dollars.” The money can then be transferred to a Bitcoin address.
Collaboration: Holger Roonemaa, Martin Laine, Oliver Kund, Riin Aljas, Šarūnas Černiauskas