Russian businessman Mikhail Klyukin, previously sanctioned by the United States, is facing scrutiny over allegations of evading sanctions through a cryptocurrency transaction.
Klyukin’s controversial sale of over £15 million shares in Copper Technologies, a digital systems company for cryptocurrency investment and trading, has raised questions about compliance with sanctions laws and the potential risks for all parties involved.
Sanctions evasion raises concerns
Mikhail Klyukin, a prominent figure in Russia and a member of the supervisory board of Russian lender Sovcombank, came under sanctions as part of the U.S. response to Russia’s invasion of Ukraine and its targeting of individuals close to President Vladimir Putin.
His presence on the White House’s sanctions list in March 2022 drew significant attention, particularly from Copper Technologies, where he owned more than 2% of the company’s shares.
The sanctions against Klyukin presented risks for Copper Technologies, as dealing with sanctioned individuals is strictly prohibited under U.S. sanctions laws. To address this issue, Copper Technologies allegedly facilitated a transaction to remove Klyukin from its shareholder register, eliminating potential legal liabilities.
Copper Technologies acted as an intermediary in selling Klyukin’s shares to a willing buyer who reportedly paid over £15 million sterling. What makes this transaction particularly controversial is the subsequent conversion of the payment into cryptocurrency, which was then transferred to Klyukin.
The deal’s structure appears to have been designed to bypass U.S. sanctions restrictions, which explicitly forbid the involvement of American citizens or the use of dollars in transactions with sanctioned individuals.
Legal experts have pointed out that Copper Technologies could have faced significant repercussions, including secondary sanctions, had U.S. authorities become aware of its involvement in a deal benefiting a sanctioned individual.
Secondary sanctions empower the U.S. to penalize non-U.S. entities that undermine its sanctions, potentially leading to exclusion from the U.S. financial system.
Furthermore, using cryptocurrency for fund transfers in this context could have exacerbated the situation. President Joe Biden’s executive order explicitly prohibits deceptive or structured transactions using digital currencies to circumvent sanctions.
Compliance claims and reactions
Copper Technologies has defended its actions, stating that it sought external legal advice and believed it was in compliance with all applicable sanctions laws. Sources close to Mikhail Klyukin’s companies also claim they adhered to U.S. sanctions, including the share sale in Copper.
The company stated, “We carefully considered the implications, including with the assistance of specialist external sanctions counsel in various jurisdictions, and concluded that the transaction was compliant with all applicable sanctions requirements.”
Former UK Chancellor Philip Hammond, who assumed the role of Chairman at Copper Technologies in January 2023, was reportedly unaware of the share sale. He only became informed during a review of major shareholders.
Regulatory scrutiny and market challenges
Besides the sanctions controversy, Copper Technologies has faced skepticism from UK financial regulators. The company’s failure to obtain full approval from the Financial Conduct Authority (FCA) and the downturn in the global cryptocurrency market have affected the value of its growth shares.
These challenges have raised concerns about the company’s long-term prospects and ability to navigate the regulatory landscape.
