Russian International Money Launderer Sentenced To Three Years In Prison For Illicitly Procuring Large Quantities Of U.S.-Manufactured Dual-Use, Military Grade Microelectronics For Russian Entities

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; Matthew S. Axelrod, the Assistant Secretary of Export Enforcement for Department of Commerce’s the Bureau of Industry and Security (“BIS”); and Robert Wells, the Executive Assistant Director of the National Security Branch of the Federal Bureau of Investigation (“FBI”), announced that MAXIM MARCHENKO was sentenced today by U.S. District Judge Nelson S. Román to three years in prison for his role in procuring dual-use, military grade OLED micro-displays for Russian end users.  MARCHENKO previously pled guilty to money laundering and smuggling charges before U.S. Magistrate Judge Victoria Reznik on February 29, 2024. 

U.S. Attorney Damian Williams said: “This Office will stop at nothing to hold accountable those who seek to circumvent our laws to gain access to some of our most sensitive technologies.  Today’s sentence should be a reminder that no number of shell companies or obfuscation will stop this Office in its pursuit of those who seek to illicitly gain access to controlled technologies.” 

Assistant Attorney General Matthew G. Olsen said: “Today’s sentence holds Mr. Marchenko accountable for his role in a procurement syndicate that funneled U.S.-manufactured military-grade microelectronics to end users in Russia, illegally delivering controlled technologies worth hundreds of thousands of dollars.  The Justice Department remains relentlessly focused on dismantling illicit procurement networks led by individuals like the defendant, who use their business skills and connections to advance the Russian war agenda.”

BIS Assistant Secretary of Export Enforcement Matthew S. Axelrod said: “The transshipment of military-grade microelectronics through Hong Kong to Russia helps fuel the engine of Russia’s war machine.  Today’s sentencing is just the latest example of our unceasing efforts to target and disrupt illegal Russian procurement networks.”

FBI Executive Assistant Director Robert Wells said: “Marchenko and his co-conspirators operated an international smuggling network of sensitive microelectronics used in military gear and other weapons systems.  Today’s sentencing demonstrates the FBI’s resolve in doing our part to protect national security and prevent American military technology from being diverted to foreign adversaries and hostile nation states.”

According to the allegations contained in the Information and other filings and statements made in court:

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 goggles, 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 or hunting rifles.  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.

To conceal the fact that these OLED micro-displays were destined for Russia, MARCHENKO and other members of the conspiracy worked together to transship the illicitly procured OLED micro-displays by using pass-through entities principally operated by MARCHENKO in third countries, such as Hong Kong.  MARCHENKO then caused the OLED micro-displays to be shipped to the ultimate destination in Russia using, among other entities, a freight forwarder known 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 more than $1.6 million to the U.S. in support of the procurement network’s efforts to smuggle the OLED micro-displays to Russia.

*                *                *

In addition to the prison term, MARCHENKO, 52, a Russian citizen who resided in Hong Kong, was sentenced to three years of supervised release.

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 BIS.  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 the Illicit Finance and Money Laundering 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 and the Justice and Commerce Departments’ Disruptive Technology Strike Force.  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 Disruptive Technology Strike Force is an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains, and prevent critical technology from being acquired by authoritarian regimes and hostile nation states.