Report: The Separatist's Guide to Circumventing Sanctions
A new report from the Centre for Information Resilience lays out how a cryptocurrency Ponzi scheme is helping leadership figures in the breakaway region of Donetsk avoid sanctions.
Download the report below.
The findings of CIR’s open-source investigation focus on two cryptocurrencies linked to high-ranking individuals in the DNR. In addition to the invasion and occupation of Donetsk, some of these individuals have also been implicated in pro-Russian election interference in Africa, influence operations in Ukraine, and the assassination of their own former leader in a bomb blast.
Our investigation traces the history of key individuals in the 2000s and early 2010s as part of what appears to be a massive global Ponzi scheme, before becoming enmeshed in the war in Donbas from 2014 onwards. The report details how even as they rose through the ranks in the DNR, they continued to promote a series of dubious financial schemes, including multiple cryptocurrency tokens.
Two of these cryptocurrencies are discussed in detail: Prizm and Ouroboros. Both cryptocurrencies supposedly have a unique internal structure but which is remarkably similar to a Ponzi scheme.
The findings of this investigation raise a range of questions. The DNR is currently under sanctions in a range of jurisdictions, and is likely to be facing more. A key leader linked to Prizm is also individually sanctioned by the United States.
Despite this, he and his associates have been able to openly promote their financial schemes across US-owned social media platforms and app stores. This prompts questions about the roles and responsibilities technology companies have, or should have, in applying sanctions to financial schemes promoted on their platforms.
The report’s author, Elise Thomas, said:
“Our investigation highlights challenges for anti-money laundering and countering terrorism financing in the cryptocurrency era, as well as for financial regulators and individual cryptocurrency investors. It appears to have been alarmingly easy for high profile members of a sanctioned armed separatist group to create and market a cryptocurrency scheme over several years."
"Most directly, these schemes are harmful to their victims. Prizm, in particular, has been intentionally marketed to ‘investors’ in the developing world with lower levels of digital literacy, who may not have had the ability to assess the financial risks they were taking. Ponzi schemes prey on the hopes and dreams of small investors; Prizm promised to ‘change the world’. Years later, it’s not clear where the money of those small investors has gone."
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