Pro-Russian groups raise cryptocurrency to support military operations

Pro-Russian groups are raising funds in cryptocurrency to support paramilitary operations and avoid US sanctions as the war against Ukraine continues, a research report published on Monday revealed.

As of Sept. 22, these fundraising groups had raised $400,000 in cryptocurrency since the start of the invasion on Feb. 24, according to TRM Labs, a digital asset compliance and risk management company.

The research revealed that groups, using encrypted messaging app Telegram, offer ways for people to send funds used to supply Russian-linked militia groups and support combat training in locations near the border with Ukraine.

One group TRM Labs identified as raising money is Task Force Rusich which the US Treasury Department describes as a “neo-Nazi paramilitary group that has engaged in combat alongside Russia’s military in Ukraine.” The Treasury Department’s Office of Foreign Assets Control (OFCA) has sanctioned Task Force Rusich.

On a Telegram channel, TRM Labs discovered that this group was looking to raise money for items such as thermal imaging equipment and radios.

The Novorossia Aid Coordinating Center, which was established in 2014 to support Russian operations in Ukraine, collected about $21,000 in cryptocurrency, mainly bitcoin, for the purpose of buying drones, the report said.

Russia was hit by a series of sanctions following its unprovoked invasion of Ukraine earlier this year aimed at cutting the country off from the global financial system. At the time, there were concerns that Russia could use cryptocurrency to avoid these penalties. However, experts said there is not enough liquidity in the cryptosystem on the scale Russia would require to move money.

But with the paramilitary groups, they move money on a smaller scale, which is enough for the goods they need to buy.

These groups likely use exchanges that don’t necessarily comply with anti-money laundering and other regulations, according to Ari Redbord, head of legal and public affairs at TRM Labs.

“They are probably using non-compliant exchanges to move these funds [into fiat currency]”, Redbord told CNBC.

“And you can do it. You just can’t do it on a large scale. And I think it’s there … we’ll say, will there be more? Of course, there will be more. But will there be billions of dollars? Highly unlikely.”

Redbord said TRM Labs used a combination of publicly available wallet addresses as well as cross-checking other websites and online activity to identify the Russian-linked groups. However, he said it is not possible to know whether these groups were working with the Russian government or in any way supported by the Kremlin.

Cryptocurrencies have been thrust into the spotlight during the Russia-Ukraine war. Ukraine has sought donations via digital coins, which can be sent quickly around the world. But they are now also used by Russian paramilitary groups.

“I think an interesting part of this story is that crypto is just a form of payment in these cases. It’s a way of moving funds. And it’s an example of it being used for good and an example of it being used for bad in this context.”, said Redbord.