According to a report by TRM Labs, pro-Russian groups have raised $400,000 in cryptocurrency to support paramilitary operations in the invasion of Ukraine. Raising funds in crypto assets allowed these groups to evade sanctions from the U.S.
The report said that the groups operated using the Telegram messaging app. They offered people ways to send money to provide supplies and training for Russian-affiliated militia groups.
One of them is Task Force Rusich, a group sanctioned by the U.S. Treasury, which described them as a “neo-Nazi paramilitary group that has participated in combat alongside Russia’s military in Ukraine.” Task Force Rusich buys items like radios and thermal imaging tools with the fund.
The Novorossia Aid Coordinating Center is also among the identified Pro-Russian groups. It was founded in 2014 to support Russia in its campaign against Ukraine. Data showed that the group had raised $21,000 in cryptocurrency to purchase drones.
Following sanctions against Russia over the invasion, concerns arose about whether its government would utilize cryptocurrency to evade them. However, multiple analysts said that the liquidity in the crypto market was not enough for Russia to move assets.
In the case of paramilitary groups, the fund movements are on a smaller scale as they only need the money to buy necessary items. These groups likely use exchanges that do not adhere to monetary regulations to convert the crypto assets into fiat, according to TRM Labs head of legal and government affairs Ari Redbord.
“And you can do that,” Redbord added. “You just can’t do that at scale. And I think that’s that, that’s where ... we’ll say, will there be more? Of course, there’ll be more. But will it be billions of dollars? Highly unlikely.”
Redbord explained that his company analyzed publicly available wallet addresses and cross-checked online activities to identify the groups. However, he said it was impossible to ensure whether the groups worked under the Russian government or at least received its support.
“I think an interesting part of this story is that crypto is just a form of payment in these cases,” Redboard said. “It’s a way to move funds. And there’s an example of it being used for good and example of it being used for bad in this context.”
Ukraine also uses crypto to raise funds
Ukraine also utilizes crypto to fund its military operation in resistance against Russia. When the invasion started in February, the country’s government immediately pleaded for crypto donations on official Twitter accounts. In March 2022, Ukraine reportedly gained $100 million in crypto through donations.
The Ukrainian government deems the use of cryptocurrency necessary as its banking system is also under Russian attack. Michael Chobanian, a founder of a Ukraine-based crypto exchange, said that this system allowed the government to buy important necessities to save lives.
Despite that, many have warned of scams amid the rapid adoption of crypto in the country. Tuan Phan, a blockchain forensics expert and survivor of the Vietnam War, said he was “empathetic” to people in Ukraine but also wanted the donated funds to be safe.
“I wanted to make sure the address where I’m sending my donation is landing in the right places,” Phan said. “There are lots of scams going on, so you have to be extra careful.”