DOJ Charges Russian in Scheme to Illegally Procure US Microelectronics
The U.S. unsealed an indictment this week against a Russian citizen and Hong Kong resident who helped illegally procure U.S. dual-use microelectronics with military applications for Russian end users. Maxim Marchenko used a network of shell companies to source the items from the U.S., DOJ said, giving false information to American distributors to assure them the products weren’t destined for Russia. Marchenko was charged with conspiring to defraud the U.S. along with money laundering, wire fraud and smuggling offenses.
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The indictment, brought by the DOJ-Commerce Department’s joint Disruptive Technology Strike Force, said Marchenko worked with two other Russians to illegally source “large quantities” of dual-use, military grade microelectronics -- specifically “OLED micro-displays” -- from the U.S. Those products can be used in rifle scopes, night-vision goggles, thermal optics and other weapon systems.
Marchenko and others used Hong Kong-based shell companies, including Alice Components Co. Ltd., Neway Technologies Limited and RG Solutions Limited, along with “other deceptive means,” to hide that the products were destined to Russia. They told U.S. companies, including a New York distributor, that the items would be sent to end-users in China, Hong Kong and other countries for use in “electron microscopes for medical research,” DOJ said. They also used “pass-through entities” to tranship the goods to their ultimate destination in Russia, using a freight forwarder “known to provide freight forwarding services to Russia.”
DOJ said Marchenko knew U.S. companies were required to report certain exports to the Census Bureau and hid the true final destination from their purchase orders “for the purpose of causing false statements to the U.S. agencies.” Marchenko and his two conspirators used the Hong Kong shell companies to hide the fact that payments for the micro-displays were coming from Russia. From about May 2022 to August 2023, DOJ said the companies funneled more than $1.6 million to the U.S. to procure the items.
As part of their cover story, one of the Russian nationals working with Marchenko “masqueraded” as an employee for SSP LTD, a Hong Kong-based company, and as “Amy Chan,” a purchase manager with Alice Components, the indictment said. The person was actually an employee for Infotechnika, a Russia-based electronics seller. The other Russian national working with Marchenko is a 25% shareholder of NPC Granat, a company added to Commerce’s Entity List in 2016 for operating in Russia’s arms sector.
Marchenko and the Russian nationals, as early as 2014, used Russia-based Radiofold Systems to buy micro-displays from the New York-based supplier, DOJ said, but the supplier ended the sales in February 2022 after Russia’s invasion of Ukraine. Soon after, the three Russians used Alice Components, the shell company, to purchase the goods. They used the alias “Amy Chan” to send a “pre-sale questionnaire” to the U.S. distributor about buying about $292,000 worth of micro-displays for medical research purposes in China.
Another order request in July 2022 asked for 2,000 micro-displays worth more than $1 million, DOJ said. The U.S. company, “at the direction of law enforcement,” told Alice Components it couldn’t fulfill the orders for “compliance-related reasons.”
The U.S. then used an undercover FBI agent to pose as the employee of a company that sold microdisplays. The agency was able to secure purchase orders from Marchenko, and ultimately tracked more than $1.3 million in wire transfers to pay for the illegal exports.
Marchenko faces a maximum five-year prison sentence each for conspiracy to defraud the U.S. and conspiracy to smuggle goods from the U.S, a 10-year sentence for smuggling goods from the U.S., and a 20-year sentence each for conspiracy to commit money laundering, money laundering, conspiracy to commit wire fraud, and wire fraud.