Mikhail Klyukin, a Russian banker sanctioned by the White House in March 2022, sold more than £15m in shares of UK-based cryptocurrency firm Copper Technologies.
The firm, chaired by former Chancellor Philip Hammond, appears to have played a significant role in the decision, raising questions about the transparency of cryptocurrency transactions and potential evasion of sanctions.
Sanctioned Russian Banker’s Transaction Raises Legal Questions
Mikhail Klyukin, who held a 2% stake in Copper Technologies, was sanctioned by the UK Foreign Office due to his involvement with Sovcombank, a Russian lender closely linked to the Putin regime.
The sanctions were part of the U.S.’s response to the Russian invasion of Ukraine, targeting individuals believed to be benefiting from or supporting the former’s government.
Copper Technologies, a London-based company with a subsidiary in New York, played a pivotal role in facilitating the transaction.
The company, known for building and managing digital systems for digital asset investments and trades, is said to have acted as an intermediary, converting the buyer’s payment in sterling into cryptocurrency before transferring it to Klyukin.
Legal experts have raised concerns about this transaction, particularly its potential to evade U.S. sanctions.
The United States, known for its stringent enforcement of sanctions, prohibits financial dealings with sanctioned individuals involving dollars or American citizens. However, this transaction leveraged the use of non-U.S. currency and non-American entities, thereby existing in a legal gray area.
The transaction’s use of cryptocurrency adds another layer of complexity. An executive order issued by U.S. President Joe Biden in April 2021 explicitly prohibited deceptive transactions designed to evade U.S. sanctions, including those involving digital currencies. Thus, the use of cryptocurrency in this deal could be seen as a potential violation of this order.
Legal experts also suggest that the transaction could have attracted “secondary” sanctions from the U.S., targeting companies or individuals indirectly aiding sanctioned entities.
Copper Technologies Claims Legal Compliance in Share Sale
Copper Technologies has maintained that its actions were legal and compliant with all applicable sanctions laws based on external legal advice.
A Copper representative emphasized the company’s commitment to anti-money laundering rules, regulatory guidelines, and sanctions laws. They stated that the purpose of the transaction was to sell Copper’s shares owned by a firm linked to a sanctioned individual.
The company also reviewed the potential consequences of this action, seeking advice from external legal experts specializing in sanctions. Following this, they determined that the transaction adhered to all relevant sanction laws.
Associates of Klyukin also confirmed that his businesses have complied with U.S. sanctions, including in the context of the sale of copper shares.
Philip Hammond, who became the chair of Copper Technologies in January 2023 but served as an advisor during the transaction, was reportedly unaware of the share sale. He was informed later during a review of major shareholders.