DOJ: Russian-Backed Ukrainian Oligarch Bought Two California Condos, Used Convoluted Scheme To Get Around U.S. Sanctions

A Russian-backed Ukrainian politician faces up to 30 years in prison for fraudulently buying property in California.

Ukranian politician Andrii Derkach was charged with seven criminal counts in an indictment unsealed on Tuesday. Derkach was previously sanctioned for trying to influence the 2020 elections, law enforcement officials said in a press release. Derkach allegedly bought two properties in Beverly Hills in violation of the sanctions, and used a complex financial scheme to hide his involvement.

“Kremlin-backed Ukrainian politician and oligarch, Andrii Derkach, was sanctioned for his efforts to influence the 2020 U.S. Presidential election on behalf of the Russian Intelligence Services,” Michael J. Driscoll, Assistant Director-in-Charge of the FBI’s New York Field Office said in a statement.

“While participating in a scripted Russian disinformation campaign seeking to undermine U.S. institutions, Derkach simultaneously conspired to fraudulently benefit from a Western lifestyle for himself and his family in the United States,” Driscoll added. “The FBI will continue to use all the tools at its disposal to identify Russian intelligence operations, disrupt Russian information laundering networks, and bring to justice those who seek to engage in criminal conspiracies to undermine the integrity of U.S elections and evade U.S. sanctions.”

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According to the indictment, the scheme began in 2013. Derkach and an unnamed co-conspirator concocted a plot to purchase and mantain two luxury condominiums in Beverly Hills. To hide his interest in the properties, the oligarch used a corporate nominee — a company that holds assets in place of an individual — a multi-level complex of shell companies based in California, and several accounts with American banks and brokerages.

Derkach then wired nearly $4 million to the nominee corporation from Latvian and Swiss bank accounts that belonged to companies registered in the British Virgin Islands. The corporation then paid $3.2 million in cash for the properties, and placed the remaining $800,000 into a brokerage account the company maintained, which was used to pay expenses on the properties.

But Derkach obscured his involvement from the institutions the money was placed in, so he prevented the companies from transferring money into sanctioned accounts, and instead caused them to conduct transactions with blocked funds and for the benefit of the condominiums, which were also blocked under the sanctions.

Derkach is charged with conspiracy to violate the International Emergency Economic Powers Acts (IEEPA), bank fraud conspiracy, money laundering conspiracy, and four counts of money laundering. He remains at large. If convicted, Derkach could face up to 30 years in prison.

In the meantime, the DOJ said it was conducting a civil asset forfeiture to seize the properties and the remaining funds in the bank and brokerage accounts.

Derkach has been a member of the Verkhovna Rada, the Ukranian Parliament. Originally from the city of Dnipro in Eastern Ukraine, Derkach was a member of the pro-Russia Party of Regions, formerly the governing party in Ukraine from 2010 until the Maidan Revolution in 2014. Derkach was sanctioned by the Treasury Department in September 2020. According to the press release, Derkach was “an active Russian agent for over a decade, maintaining close connections with the Russian Intelligence Services” as part of an effort to influence the 2020 election.

The DOJ conducted the investigation in conjunction with KleptoCapture, an interagency law enforcement task force created to enforce the U.S. sanctions imposed on Russian actors in response to the Russian invasion of Ukraine.

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