Estonia, an early recipient of cryptocurrency licenses in the EU, has fallen prey to extensive crypto-related fraud and scams, as revealed by an investigative report conducted by international journalists.
A group of journalists scrutinized nearly 300 crypto firms registered in Estonia and uncovered “dozens of crimes.” International crypto criminals have laundered or defrauded victims of over €1 billion (approximately 1.05 billion euros), according to a recent report.
The crimes committed by Estonian crypto firms encompassed “massive-scale” fraud, money laundering, sanctions evasion, and illegal financing of criminal groups, including the notorious paramilitary organization, the Wagner Group, associated with the Russian private army. Some Estonian crypto firms also had connections with the Russian banking giant Sberbank.
Key Findings: The detailed investigative report, published on an independent journalism platform called VSquare, revealed that Estonia witnessed a significant influx of crypto businesses over the past five years, with 55% of all crypto service providers worldwide registered in Estonia as of mid-2021.
Estonia’s lenient crypto licensing and approvals attracted international crypto platforms, allowing them to market themselves as EU-licensed financial services. However, recent regulatory tightening in Estonia resulted in the revocation of licenses for many non-compliant companies, prompting several firms to relocate to neighboring Baltic nations.
Over the last six years, 1644 licensed cryptocurrency companies have operated in Estonia, as noted by journalists.
Additionally, many international crypto firms in Estonia employed individuals with evident financial difficulties and no experience in the field as anti-money laundering (AML) officers.
Russian Connections: These fraudulent crypto firms from Estonia had ties to some of the most notorious military groups in Russia and donated crypto assets worth hundreds of thousands of euros.
For example, the now-defunct Russian darknet market Hydra received approximately 2,505 Bitcoins originating from the Garantex exchange in Estonia between April 2021 and April 2022.
“Garantex” also had connections to several wallets engaged with the Lazarus Group, a North Korean cybercriminal group, and with Ivan Vasilyevich Vakhromeyev, a wanted cybercriminal associated with Conti, a cybercriminal group with ties to Russian intelligence.
By FCCT Editorial Team
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