How did that happen?? A digital currency was launched by a Russian national on a US sanctions list, with ties to a $100M Ponzi scheme

By Christine Duhaime | November 25th, 2019

Russian on OFAC list launches a coin

The Kharon Brief has an interesting article here about Aleksei Muratov (Алексей Муратов), also spelled Aleksey Muratov, a Russian foreign national who is on the US OFAC sanctions list here, who founded, launched and owns an initial coin offering called PRIZM.

More surprisingly still, despite sanctions law, correspondent banking law, and bank contractual arrangements that prohibit dealing in assets, however indirectly, of OFAC sanctioned persons, or of using the financial system in respect of those assets, PRIZM is listed on a few digital currency exchanges around the world. Not only can a person buy PRIZM on those exchanges, other exchanges have website posts that encourage the public to buy Bitcoin or Ether through them to enable them to buy PRIZM, irrespective of the law.

He’s also chairman of the Donetsk People’s Republic, which the Ukraine says is a terrorist organization

Muratov is the Central Executive Committee chairman of the Donetsk People’s Republic, a self-declared sovereign state seeking independence from the Ukraine. The Ukrainian government says the organization is a terrorist organization. According to an official investigation conducted in the Netherlands, Donetsk People’s Republic operatives fired the missile that downed the Malaysian Airlines flight MH-17, killing 283 passengers on board.

PRIZM whitepaper

The PRIZM coin has a white paper for investors. It explains that the purpose of its digital currency is to move money anywhere in the world. It promises returns of up to 9.9% for mining via “proof of steak” (presumably they mean “proof of stake” and not the meat product). The coin is popular and does have a Blockchain explorer, which shows peers validating transactions – most have IPs from Russia, Kazakstan and Germany. Its Instagram account promises that by using PRIZM, a user can avoid financial crime laws altogether – it says no identity is collected or required, and it is completely anonymous. It goes so far as to say its transactions are also anonymous and a user can move money anywhere on the planet in seconds.

On Instagram, it promises anonymous money
transfers anywhere on the planet

PRIZM’s promoter is the founder of the defunct WEX exchange, which has US$450 million allegedly missing

PRIZM is being promoted by Dmitriy Vasilyev, the Russian national who co-founded the World Exchange Services (WEX) digital currency exchange in Singapore, where the AML laws are lax. The WEX rose from the ashes of the BTC-e digital currency exchange, shut down by the FBI in conjunction with the Canadian darknet site AlphaBay. At that time, they launched an ICO, the WEX ICO, possibly to acquire users from the former BTC-e. More recently, Vasilyev was arrested in Italy in connection with WEX. The WEX ICO is no more.

Dmitriy Vasilyev, from BTC-e to WEX to PRIZM

The other co-founder of WEX, Alexei Bilyuchenko (who was an admin of BTC-e), alleges that WEX lost US$450 million because Russian agents from the Federal Security Service forced him to hand over the Trezors holding all of the pooled digital currencies of the exchange and of its customers, as well as the passwords. Part of what he alleges doesn’t make sense because he also alleged that it would take two weeks to transfer the digital currencies in the Trezors to the Russian agents. It doesn’t make sense because if a person has the Trezors with the passwords, he or she has the digital currencies.

PRIZM is tied to anti-vaxxers

The PRIZM coin has a political agenda, beyond the fact that its founder is a leader of the separatist Donetsk People’s Republic. The PRIZM coin is promoted as an “activist” coin on its social media accounts, affiliated with an organization called Change The World (CTW). It is an anti-vaxx organization, calling for an end to all vaccinations globally. Proceeds from buying PRIZM coins go to anti-vaxxers. They also support the Donetsk People’s Republic.

PRIZM founder says ICOs can bypass sanctions and joins ceremony burning US currency

That PRIZM may have been created in part to move money to avoid sanctions is suggested from comments Muratov has made. For example, on Twitter below, he suggests digital currencies can be used to bypass US sanctions. He also runs PRIZM mining farms, creating his own stash of PRIZM coins that he can convert to Bitcoin or cash out on any exchange.

In another possible sanctions statement, people from CTW with Muratov (in the grey hooded jacket), held a ceremony for PRIZM which involved the burning of US dollar bills; whether fake or real is unknown.

Burning US cash for PRIZM

And a few months ago, an orthodox priest blessed PRIZM.

Bless this ICO.

Both groups (PRIZM coin and CTW) held a black tie ball for their so-called activists in Russia, and used pictures of Hollywood movie stars and a famous model in the video to suggest they attended the ball (and ergo support PRIZM). None of the movie stars or models in their video attended the event.

Ties to Ponzi scheme called MMM

News articles that interviewed Muratov allege he is a nuclear engineer and was the Head Engineer of the Kursk Nuclear Power Plant in Russia for ten years, a post he left to go into politics at 24-years-old, which would mean he was the head of the nuclear plant’s engineering at 14-years-old, which means he entered university at 6-years-old.

In Russia, he was the deputy of the Kurchatov City Duma and later moved to India where he was associated with a Ponzi scheme called Mavrodi Mondial Moneybox (MMM). He was arrested in India in 2013 in connection with MMM. Allegedly, Russian consular officials in India assisted him to flee to Russia to avoid prosecution for MMM.

Sergey Mavrodi

MMM was a Russian Ponzi scheme that had three or more iterations. The first iteration was started in the 1990s by a Russian named Sergey Mavrodi, as an investment fund that promised returns of 3,000% to investors. Investors lost over US$1 billion (equal back then to 1/5 of the central bank’s reserves) but despite the losses, part of the Russian population continued to support Mavrodi. Mavrodi admitted MMM was a Ponzi scheme but said it was, in his view, a virtuous one. Here, after he is released from prison, he admitted that Russian investors were illiterate and did not know what they were giving money to him for, and that he put most of the money in beneficial ownership arrangements (in shares of other corporations held in the names of other persons for him) and had no intention of paying the US$1 billion back.

The Mavro ICO

The later iteration involved Bitcoin payments. It launched after the death of Mavrodi. It had its own digital currency called the Mavro (named after Mavrodi). One Bitcoin was equal to one Mavro. To acquire Mavro coins, a member had to first help another person by sending them Bitcoin, and once a person sent Bitcoin, he or she would get an equal amount of Mavro sent to a wallet plus 30%. And if they promoted MMM on social media, they could earn more Mavro. Many of the Ponzi participants had accounts on BitcoinTalk where they solicited payments in Bitcoin. The Mavro appears to have been capable of being used for nothing and in essence, it would appear that members were just sending Bitcoin away to strangers and getting nothing in return except access to a wallet that held a certain balance of Mavro coins.

At its peak, the iteration of this MMM scheme circulated more than US$150 million dollars a day. The scheme was a a zero-sum investment model, in which one person’s loss was another’s gain. The Ponzi scheme took money from victims in over 80 different countries, mostly from India and Indonesia but transactional analysis showed that much of the funds stayed in Indonesia, suggesting the funds are parked there and scientists found that a large portion of the proceeds of crime from the Ponzi scheme went through digital currency exchanges.

Muratov does not downplay a role in MMM or his admiration for Mavrodi. They are promoted on the CTW blog here, which alleges that MMM and Mavrodi were responsible for the growth of digital currencies in the world and the blog promises to continue the work of Mavrodi with MMM.

MMM is starting a new iteration with a new website for the coin, with a promotional video explaining how the Mavro coin was founded by Mavrodi after his incarceration, and extolling the virtues of MMM. It’s basically a commercial about how Mavrodi was a hero for taking a US$1 billion from Russians under the MMM banner and how the Russian government stole all the money (so Mavrodi couldn’t pay anyone back).

The theory that the Russian government is allegedly forcibly taking assets when they go missing is a new recurring theme advanced by some Russian digital currency people (Mavro coin; WEX coin; WEX exchange), who seem to be interconnected.

Slick new ICO video for 2019

Financial crime risks

Despite the heightened financial crime risks arising from, among other things: the sanctions listing; the connection to a separatist state engaged in terrorist-related activities blowing up critical infrastructure for political purposes; the downing of MH-17 that killed hundreds of people; the ties to the MMM Ponzi scheme; the ties to BTC-e, AlphaBay and WEX; PRIZM continuing the work of Mavrodi with MMM; and the ability to use PRIZM to send money to any person anywhere irrespective of whether they are on a prohibited list, a digital currency exchange in Canada posted guidance showing how it will conduct financial transactions for users to buy and sell PRIZM.

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