A Russian national helped smuggle, via shell companies in Hong Kong, more than $1.6 million in microelectronics to Moscow potentially to support its war against Ukraine, it is claimed.
The US Justice Department on Monday slapped seven charges on Maxim Marchenko, 51, over his alleged involvement in the scheme to illegally procure US-sourced OLED displays on behalf of end users in Russia. These so-called dual-use displays can be used in rifle-scopes, night-vision goggles, thermal optics, and other weapon systems, among other applications.
It’s worth noting that it’s not so much that Uncle Sam knew for sure that the displays would be used in weapons; the government is unhappy that, in its mind, laws were broken to get electronics with potential military uses quietly into Russia at a time when the Kremlin was ordering daily assaults on its neighboring nation.
“We are laser-focused on rooting out the procurement networks fueling the Russian war machine,” said Assistant Secretary for Export Enforcement Matthew Axelrod.
“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.”
Marchenko is charged with conspiracy to defraud the US, conspiracy to commit money laundering, conspiracy to smuggle goods from the US, money laundering, smuggling goods from the US, conspiracy to commit wire fraud, and wire fraud. If convicted on all seven counts, he faces up to life in prison. We’re told that he has been arrested and detained.
According to court documents [PDF], Marchenko and two Russian co-conspirators ran an illicit procurement network in Russia, Hong Kong, and elsewhere between May 2022 and August 2023.
The network’s primary goal was to buy micro-displays manufactured “by a particular American company based in Dutchess County, New York,” and smuggle them to Russia, it is claimed. While it isn’t named in the legal complaint, Samsung-owned eMagin, which is based in that New York county, is a key manufacturer of OLED microdisplays in America.
After Russia invaded Ukraine in February 2022, eMagin and its board vowed to no longer sell their products to Russian customers, or to customers that ship their products to the former Soviet Union.
“Probably more than obvious at this time, but the company and board have decided it is no longer right for us to sell or ship to Russian customers and risk that our displays will be used in devices that could put US or NATO forces in harm’s way, or support Russia’s unlawful invasion of Ukraine and its human rights abuse,” a company exec said in an email to employees, which was quoted in the prosecution’s court filings.
So Marchenko and friends allegedly set up several shell companies to bypass eMagin’s Russia ban and skirt US export regulations.
“Marchenko’s primary role in the procurement network is and was to maintain front companies based in Hong Kong,” the court documents stated. These shell companies included Alice Components, Neway Technologies, and RG Solutions.
As part of this claimed conspiracy, Marchenko, who lives in Hong Kong, allegedly acquired the OLED microdisplays from eMagin by concealing the fact that the gear was going to Russia and that payment was coming from that country, which the US company would be required to report to domestic agencies under current sanction laws.
Neither of the two co-conspirators are directly named in the complaint. Co-conspirator 1 works for Infotechnika, a Russian-based electronics seller that shares a physical address with a sanctioned company, NPO Electronic Systems, that the US government says supports Russian military and security services. This alleged fraudster goes by the name of Amy Chan, and purports to be a purchase manager for Alice Components.
The second co-conspirator is a director at NCP Topaz, another Russian company that shares an IP address with Infotechnika, and is a 25 percent shareholder at NPC Grant, another Russian electronics company that has been sanctioned by the US.
Marchenko and his alleged co-conspirators reportedly told the US manufacturer that Alice Components was sending the shipments to end-users in China and Hong Kong for non-military uses, such as medical and veterinary imaging, digital cameras, and video games.
“In total, between in or about May 2022 and in or about August 2023, Marchenko’s front companies have funneled a total of more than $1.6 million to the US in support of the procurement network’s efforts to smuggle the micro-displays to Russia,” according to prosecutors. ®