Estonian Crypto Firms Engage in ‘Massive-Scale’ Fraud and Aid Russia Evade Sanctions: Report

Estonia has been one of the early receivers of cryptocurrency licenses in the EU, but it did not save the Baltic nation from falling victim to ‘massive-scale’ crypto-related fraud and scams, an investigation report from international journalists revealed.

A group of journalists reviewed close to 300 crypto firms registered in Estonia and discovered “dozens of crimes.” International crypto criminals have laundered or defrauded victims for more than €1 billion (1.05 billion), a recent report said.

Crimes by Estonian crypto firms included “massive scale” fraud, money laundering, sanctions evasion, and illegal financing of crime groups and the Russian private army including the notorious paramilitary organization – Wagner Group.

Some crypto firms from the Baltic nation also had links with the Russian banking giant Sberbank, the report further said.

Investigation Highlights

According to the detailed investigation report published on an independent journalism portal VSquare, Estonia saw a mass inflow of crypto businesses over the last 5 years, with 55% of all crypto service providers in the world registered in Estonia as of mid-2021.

The liberal crypto licensing and approvals have drawn international crypto platforms to promote themselves as EU-licensed financial services, it further said. However, the latest tightening of regulations in Estonia has stripped the licenses of many non-compliant companies. As a result, many firms moved to other Baltic neighboring nations.

During the last six years, 1644 licensed cryptocurrency companies have operated in Estonia, journalists noted.

Furthermore, many international crypto firms in Estonia used people with obvious financial difficulties and no experience in the field have been used as anti-money laundering (AML) officers.

Russian Ties

These fraud crypto firms from the Baltic country had links to most infamous military groups in Russia, donating crypto assets worth hundreds of thousands in Euros.

For instance, a now-defunct Russian darknet market Hydra received about 2,505 Bitcoins originating from Garantex exchange in Estonia between April 2021 and April 2022.

“Garantex also has a connection to a number of wallets transacting with the Lazarus Group, a North-Korean cyber criminal group, and with Ivan Vasilyevich Vakhromeyev, a wanted cybercriminal connected to Conti, a cybercriminal group with Russian intelligence ties.”