RUSSIAN INTERNATIONAL MONEY LAUNDERER ARRESTED FOR ILLICITLY PROCURING LARGE QUANTITIES OF U.S. MANUFACTURED DUAL USE, MILITARY GRADE MICROELECTRONICS FOR RUSSIAN ENTITIES

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WPCNR FBI WIRE. From U.S. Attorney’s Office, Southern District of New York May 19

Maxim Marchenko Allegedly Participated in an Overseas Illicit Procurement Network That, After Russia’s Invasion of Ukraine, Illegally Procured Large Quantities of Dual-Use, Military Grade OLED Micro-Displays for Russian End Users

Damian Williams, the United States Attorney for the Southern District of New York, Matthew G. Olsen, the Assistant Attorney General of the Justice Department’s National Security Division, David Lim, Co-Director of Task Force KleptoCapture, James Smith, the Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), and Matthew S. Axelrod, the Assistant Secretary of Commerce for Export Enforcement–

announced the unsealing of a Complaint charging MAXIM MARCHENKO with conspiring to defraud the United States and with smuggling, wire fraud, and money laundering offenses based on MARCHENKO’s alleged participation in a scheme to unlawfully procure U.S.-sourced, dual-use microelectronics with military applications on behalf of end users in Russia.  MARCHENKO was presented before U.S. Magistrate Judge Andrew E. Krause in White Plains federal court early Monday and ordered detained.

U.S. Attorney Damian Williams said: “As alleged, Maxim Marchenko participated in an illicit procurement network that provided military grade microelectronics to end users in Russia.  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.  This Office will relentlessly pursue those who seek to flout U.S. law in order to supply Russia with military technology.”

Assistant Attorney General Matthew G. Olsen said:

“According to the complaint, Marchenko employed a web of shell companies as part of an overseas smuggling ring to ship dual-use U.S. technology with military applications to Russia in contravention of U.S. law.  Today’s action reinforces the Department’s commitment to protect U.S. security and counter Russian aggression in Ukraine through the vigorous enforcement of our export control laws.”

Co-Director of Task Force KleptoCapture David Lim said:

“Disrupting the efforts of facilitators and procurement agents like Marchenko, who use their skills and connections to advance the agenda of the Russian war machine, is one of the most important priorities of this Task Force.  Today’s arrest should serve as another reminder that we will leverage and deploy every tool to bring these criminals to justice.”

FBI Assistant Director in Charge James Smith said:

“Attempts by individuals to circumvent U.S. law through money laundering and other forms of deception undermine foreign policy established to keep the United States and our allies safe.  Marchenko allegedly defied U.S. law by procuring sensitive American-made electronics on behalf of the Russian end users, directly endangering citizens in both Ukraine and the United States.  The FBI will not yield in its efforts to stop those who deceive the U.S. government and directly jeopardize our national security.”

Assistant Secretary of Commerce for Export Enforcement Matthew S. Axelrod said: “We are laser-focused on rooting out the procurement networks fueling the Russian war machine.  Working hand-in-hand with our federal law enforcement partners, we will continue to identify and disrupt Russia’s use of front companies in the People’s Republic of China and elsewhere to evade our controls.”

According to the allegations contained in the Complaint unsealed today in White Plains federal court:[1]

MAXIM MARCHENKO

is a Russian national who resides in Hong Kong and operates several Hong Kong-based shell companies, including Alice Components Co. Ltd. (“Alice Components”), Neway Technologies Limited (“Neway”), and RG Solutions Limited (“RG Solutions”).

MARCHENKO and two co-conspirators (“CC-1” and “CC-2”), who are also Russian nationals, operate an illicit procurement network in Russia, Hong Kong, and elsewhere overseas.

This procurement network has fraudulently obtained from U.S. distributors large quantities of dual-use, military grade microelectronics, specifically OLED micro-displays, on behalf of Russia-based end users.

To carry out this scheme, MARCHENKO, CC-1, and CC-2 used shell companies based in Hong Kong and other deceptive means to conceal from U.S. Government agencies and U.S. distributors that the OLED micro-displays were destined for Russia.

The technology that MARCHENKO and his co-conspirators fraudulently procured have significant military applications, such as in rifle scopes, night-vision googles, thermal optics, and other weapon systems.

To perpetrate the scheme, MARCHENKO and other members of the conspiracy acquired the dual-use OLED micro-displays from U.S.-based distributors using MARCHENKO’s Hong Kong-based shell companies, including Alice Components, Neway, and RG Solutions.

Members of the conspiracy, including MARCHENKO, procured these sensitive microelectronics by falsely representing to the U.S. distributors (who, in turn, are required to report to U.S. agencies) that Alice Components was sending the shipments to end users located in China, Hong Kong, and other countries outside of Russia for use in electron microscopes for medical research.

In reality, the OLED micro-displays were destined for end users in Russia.

MARCHENKO and other members of the conspiracy concealed the true final destination (Russia) from U.S. distributors for the purpose of causing false statements to the U.S. agencies.

 

MARCHENKO then caused the OLED micro-displays to be shipped by a freight forwarder known to provide freight forwarding services to Russia, to be shipped to the ultimate destination in Russia using, among other entities, a freight forwarder know to provide freight forwarding services to Russia.

   In addition, MARCHENKO and other members of the conspiracy used Hong Kong-based shell companies, principally operated by MARCHENKO, to conceal the fact that payments for the OLED micro-displays were coming from Russia.  

In total, between in or about May 2022 and in or about August 2023, MARCHENKO’s shell 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 OLED micro-displays to Russia.

*                *                *

MARCHENKO, 51, a Russian citizen who has resided in Hong Kong, is charged with conspiracy to defraud the United States, which carries a maximum sentence of five years in prison; conspiracy to commit money laundering, which carries a maximum sentence of 20 years in prison; conspiracy to smuggle goods from the United States, which carries a maximum sentence of five years in prison; money laundering, which carries a maximum sentence of 20 years in prison; smuggling goods from the United States, which carries a maximum sentence of 10 years in prison; conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and wire fraud, which carries a maximum sentence of 20 years in prison.

The statutory maximum penalties are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant would be determined by a judge.

Mr. Williams praised the outstanding investigative work of the FBI and its New York Field Office, Counterintelligence Division and the New York Field Office of the Bureau of Industry and Security of the Department of Commerce.

Mr. Williams also thanked the FBI’s Legal Attaché office in Australia; the U.S. Department of State’s Diplomatic Security Service; the Department of Justice’s National Security Division, Counterintelligence and Export Control Section; and the Office of International Affairs of the Department of Justice’s Criminal Division for their assistance.

This case is being handled by the Office’s White Plains Division and Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Jennifer N. Ong and Shiva H. Logarajah are in charge of the prosecution, with assistance from Trial Attorney Garrett Coyle of the Counterintelligence and Export Control Section.

Today’s actions were coordinated through the Justice Department’s Task Force KleptoCapture.

Task Force KleptoCapture is an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that the United States has imposed, along with its allies and partners, in response to Russia’s unprovoked military invasion of Ukraine. 

The charges in the Complaint are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

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