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Hong Kong money launderer nabbed in smuggling of military-grade gear to Russia

Prosecutors say a Russian living in Hong Kong used front companies to smuggle shipments of microtechnology to Russia during its war against Ukraine.

MANHATTAN (CN) — Prosecutors in the Southern District of New York on Monday announced the arrest of a Russian national who procured shipments of rifle scope technology through a Hong Kong shell company in breach of international Ukraine war sanctions.

According to charges unsealed on Monday, 51-year-old Maxim Marchenko flouted U.S. sanctions against Russia by procuring digital microdisplays for Russian buyers through shell companies that claimed to buying the technology for use in "China, HK [Hong Kong], Malaysia, Europe", not Russia.

Marchenko, a Russian national who resides in Hong Kong and operates several Hong Kong-based front companies, was charged in a seven-count complaint including counts of wire fraud, conspiracy to commit wire fraud, conspiracy to smuggle goods from the United States,  and promotional money laundering.

According to the complaint, Marchenko employed a network of shell companies and transshipments as part of an overseas smuggling ring to ship dual-use U.S. electronics — goods that have a primary commercial or civil application but also have the potential for military or weapons applications — to Russian buyers in contravention of U.S. law.

Prosecutors specifically point to purchases of multiple shipments of OLED microdisplays, which are smaller and of a higher resolution than normal OLED (organic light-emitting diode) display screens.

The main civil application OLED microdisplays is for electronic viewfinders for digital cameras and in medical and veterinary imaging, while also having military applications including as rifle scopes.

Although the complaint does not name the product’s manufacturer, eMagin, based in Dutchess County, New York, is only manufacturer of OLED microdisplays in the United States.

According to the complaint, the company ceased business with Russian entities as the war in Ukraine broke out, with executives acknowledging the possibility of their products being used in Russian weapons of war.

"Probably more than obvious at this time, but the company and board have decided it is no longer right for us to sell or ship to Russian customers and risk that our displays will be used in devices that could put U.S. or NATO forces in harm's way, or support Russia's unlawful invasion of Ukraine and its human rights abuse," the company told employees in a February 2022 e-mail.

The money laundering, wire fraud, and conspiracy counts each carry a maximum penalty of 20 years in prison if convicted.

Damian Williams, the U.S. Attorney for the Southern District of New York, applauded the charges.

“Following Russia’s unjust invasion of Ukraine, Marchenko and his co-conspirators are alleged to have used shell companies and other deceptive measures in order to secure U.S.-manufactured microelectronics, with applications including in rifle scopes, night-vision goggles, thermal optics, and weapon systems, for use by Russians,” Williams wrote in an announcement Monday afternoon. “This office will relentlessly pursue those who seek to flout U.S. law in order to supply Russia with military technology.”

Prosecutors say that between approximately May 2022 and August 2023, Marchenko’ s front companies funneled a total of more than $1.6 million to the United States in support of the procurement network's efforts to smuggle the micro-displays to Russia.

Marchenko appeared before U.S. Magistrate Judge Andrew E. Krause in White Plains federal court on Monday and ordered detained.

He was provisionally appointed a federal defense attorney, Rachel Martin.

Marchenko’s arrest was coordinated through the Justice Department’s Task Force KleptoCapture, which Attorney General Merrick Garland launched  in March 2022 — just days after Russia’s war against Ukraine began — to enforce U.S. sanctions, export controls and economic countermeasures against Putin and his operatives. 

The task force has seized Russian billionaire Viktor Vekselberg’s superyacht, as well as the Russia-affiliated Hydra darknet market, which is known to be the world’s largest illegal marketplace on the dark web.

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Categories / Criminal, International, Technology

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