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A U.K. cryptocurrency firm has found itself in the spotlight after transferring digital assets worth over $4.2 million to a crypto wallet linked to a member of an alleged Russian arms-dealing network who was later sanctioned by the United States. The transactions involving Copper Technologies have raised concerns about the adequacy of U.K. laws governing the cryptocurrency industry in the face of rapid technological advancements.
The Connection to Jonatan Zimenkov
An analysis conducted by the International Consortium of Investigative Journalists and The Guardian has uncovered a connection between Copper Technologies and Jonatan Zimenkov, a 29-year-old Israeli-born Russian national. Zimenkov was sanctioned by the U.S. in February 2023 for his alleged involvement in assisting the Russian military with the invasion of Ukraine as part of the “Zimenkov network,” led by his father, Igor Zimenkov.
Transfer of Digital Assets
Records reveal that in May 2021, Copper transferred millions of dollars worth of digital currency to a wallet identified as belonging to Zimenkov. At the time of the transfer, Zimenkov was not under sanctions. However, the U.S. Treasury Department later imposed restrictions on him and 21 other individuals and entities associated with the network.
Compliance and Regulations
Copper maintains that it has acted in full compliance with all applicable regulatory standards and sanctions prohibitions in the UK. It was not obligated to verify Zimenkov’s identity as he was not a client of the firm. However, questions have been raised about the level of due diligence conducted by financial companies in the cryptocurrency space.
Regulatory Developments
The U.K. adopted a “travel rule” in late 2023, requiring cryptocurrency companies to conduct checks on funds transferred to external parties. This move came amidst growing concerns from regulators about the potential misuse of digital assets for illicit purposes.
Blockchain Analysis
Blockchain logs show that Copper transferred over 1,700 units of ethereum, valued at more than $4.2 million, to Zimenkov in May 2021. The purpose of the transactions and the original source of the digital assets remain unclear. Zimenkov’s wallet was liquidated and ceased transactions in February 2022, a year before he was publicly sanctioned.
Allegations Against the Zimenkov Network
The U.S. Treasury Department has accused the Zimenkov network of engaging in projects related to Russian defense capabilities, including supplying high-technology devices to a Russian company post the invasion of Ukraine. Igor Zimenkov, Jonatan’s father, is alleged to have led the network in enabling Russian defense sales to third-country governments.
Conclusion
The revelations surrounding the transfer of digital assets to Zimenkov’s wallet underscore the challenges faced by regulators in overseeing the cryptocurrency industry. As the sector continues to evolve, there is a growing need for enhanced due diligence and regulatory measures to prevent the misuse of digital assets for illicit purposes.
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