The United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced additional sanctions on August 23, 2024, targeting nearly 400 entities to disrupt Russia’s military supply chain and procurement networks, according to Chainalysis. Among the designated entities is KB Vostok OOO, a Russian unmanned aerial vehicle (UAV) developer linked to the invasion of Ukraine.

Who is KB Vostok?

KB Vostok, also known as Vostok Design Bureau, is recognized for designing UAVs that have been deployed by Russian forces. The Department of the Treasury highlighted the company’s Scalpel UAV, describing it as a “one-way-attack platform that can carry a payload of up to five kilograms.” In a statement reported by the Russian news agency TASS in September 2023, KB Vostok mentioned ongoing dialogues with the military regarding technical requirements for their aircraft.

The Scalpel UAV is noted for its simple production and affordability, costing approximately 200,000 rubles ($2,200) per unit, making it a cost-effective option amid intense sanctions pressure on Russia. The country has collaborated closely with Iran to acquire and deploy lethal UAVs in Ukraine, highlighting the importance of affordable UAVs in conflict zones.

Examining the On-Chain Activity of KB Vostok

The OFAC designation also included a USDT wallet address used by KB Vostok to solicit donations. Analysis of the wallet’s on-chain activity suggests potential purchases of KB Vostok’s UAVs. Of the 18 USDT deposits received, 16 originated from a single counterparty, often matching the price of the Scalpel UAV, indicating possible purchases.

Given KB Vostok’s support to Russian military operations and the transaction volumes, the counterparty likely belongs to a larger entity within Russia’s military supply chain. Active since January 12, 2023, this counterparty has processed nearly $40 million in transfers, often in large sums, suggesting significant involvement in the military supply chain.

Furthermore, the counterparty has used multiple deposit addresses at the sanctioned Russian exchange Garantex, cumulatively processing over $100 million in USDT. This indicates extensive use of Garantex to facilitate these activities.

Targeting Cryptocurrency Use by Russia’s War Machine

The OFAC designation of KB Vostok and its associated wallet address highlights the use of cryptocurrency to fund military activities within Russia’s war machine. This action underscores the critical role of blockchain analysis in tracing and disrupting these efforts.

As cryptocurrency becomes increasingly integrated into the global financial system, the U.S. government’s efforts to disrupt the financial facilitation networks of Russia’s military-industrial complex, including through cryptocurrency, affirm its commitment to weakening adversarial military capabilities and supporting Ukraine’s defense. The designation of nearly 400 entities worldwide, announced the day before Ukrainian Independence Day, speaks to this resolve.

For more details, visit the Chainalysis website.

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