The battle to intercept the crypto that is powering Russia’s Ukraine invasion
Like Russian troops have flooded into Ukraine’s borders over the past eight months – and with an ongoing mobilization of hundreds of thousands underway – the Western world has taken drastic measures to cut the economic ties that fuel Russia’s invasion and occupation. But while these global sanctions have carefully removed Russia from global trade, millions of dollars have continued to flow directly to Russian military and paramilitary groups in a form that has proven more difficult to control: cryptocurrency.
Since Russia began its full-scale invasion of Ukraine in February, researchers have recovered at least $4 million worth of cryptocurrency from groups supporting Russia’s military in Ukraine. According to analysis by cryptocurrency tracking firms Chainalysis, Elliptic and TRM Labs, as well as investigators at Binance, the world’s largest cryptocurrency exchange, the recipients include paramilitary groups that provide ammunition and equipment, military contractors and arms manufacturers. This flow of funds, often to officially sanctioned groups, shows no sign of abating and may even be accelerating: Chainalysis tracked approximately $1.8 million in funding to the Russian military groups in the past two months alone, nearly equivalent to the 2.2 million dollars it found the groups received five months before. And despite the ability to trace those funds, freezing or blocking them has proven difficult, largely because of unregulated or sanctioned cryptocurrency exchanges — most of them based in Russia — that have paid out millions in donations earmarked for intruders.
“Our goal is to identify all crypto wallets used by Russian military groups and the people who help them; to find, seize and block all this activity that helps to buy the bullets, the ammunition of this occupation,” says Serhii Kropyva, who until recently served as deputy of Ukraine’s cyber police and adviser to the country’s attorney general. “With close cooperation with companies like Chainalysis and Binance, we can see all the wallets involved in this criminal activity, these money flows of millions of dollars. But unfortunately, we can see that the transfer continues throughout the time.
In separate reports, the cryptocurrency tracking firms and Binance’s investigative team tracked donations to the Russian war effort that very often began with public posts on the messaging app Telegram asking for crowdfunded donations. For example, Chainalysis found Telegram posts from organizations including the pro-Russian media sites Rybar and Southfront, as well as the paramilitary group Rusich – which has ties to the notorious Wagner mercenary group – all posting cryptocurrency donation addresses to Telegram. Those posts told followers that the money raised there would be used for everything from weapon-powered drones to radios, rifle accessories and body armor. In another case, Chainalysis points to a fundraiser by a group called Project Terricon that attempted to auction off NFTs to support pro-Russian militia groups in eastern Ukraine, although the NFTs were removed from the marketplace they were hosted on before any bids was entered.
Binance’s investigative team found in its own report that a total of $4.2 million in crypto had been sent to Russian military groups since February. The groups named in their research did not completely overlap with those mentioned in Chainalysis’ report, suggesting that the combined funding could be far greater than either Binance’s or Chainalysis’ total. Binance, for example, points to a pro-Russian “heritage” group known as MOO Veche that has conducted fundraisers for military equipment similar to the kind funded by the groups Chainalysis flagged. While Binance, TRM Labs, and Elliptic all name MOO Veche as a major fundraiser, Elliptic tracked $1.7 million in crypto donations to the group, far more than the other researchers.
