Earlier this month, John Can Unsalan, the president of a steel-making company with ties to Russian oligarchs, pled guilty to one count of conspiracy to commit money laundering, based on financial transactions committed with the alleged intent to promote U.S. sanctions violations.
Unsalan’s company, known as Metalhouse LLC, was formed in Florida in 2014. According to the plea agreement, between 2018 and 2021 Unsalan facilitated transactions through Metalhouse with companies controlled by Sergey Kurchenko, a Russian oligarch who has been on OFAC’s Specially Designated Nationals and Blocked Persons (“SDN”) List since 2015 (Kurchenko was initially put on the SDN List for allegedly misappropriating state funds belonging to Ukraine). It is generally illegal for U.S. persons to directly or indirectly conduct business with individuals or entities on the SDN List – although the U.S. government is able to grant exceptions on a case-by-case basis.
According to the factual basis supporting the plea agreement, Unsalan knowingly participated in a scheme with Kurchenko to evade sanctions through Metalhouse transactions, which totaled around $157 million over the relevant three-year period. The scheme involved two shell companies – one formed in Hong Kong and one in Cyprus – controlled by Kurchenko. Unsalan and his associate at Metalhouse met with Kurchenko in person and subsequently contracted with Kurchenko’s companies to order steel and other raw materials and to pay for the materials using offshore bank accounts. Ultimately, Unsalan and Metalhouse received a total of over $160 million from reselling those materials to third parties – and although most of that money went to Kurchenko to pay for additional raw materials, the factual basis supporting the plea agreement alleged that Unsalan kept millions in profits for his own personal use.
The government’s alleged facts focused largely on evidence that Unsalan knowingly took part in this scheme: he knew that Kurchenko and his entities were on the SDN List, he knew it was illegal to conduct business with a sanctioned individual and he did not apply for an exception from the U.S. government. Interestingly, a good portion of this evidence came in the form of contract disputes between Unsalan and Kurchenko. For example, it appears that Kurchenko often neglected to ship the contracted goods even after Unsalan paid for them, and Unsalan and his associate spent a good deal of time trying to get their money back. These disputes, which came through coded text messages or encrypted emails, not only helped to prove that business deals were taking place, but also that Unsalan had knowledge of the illicit component of such deals.
This plea deal follows an April 2023 indictment of Unsalan on multiple counts of money laundering offenses: “one count of conspiring to violate and evade U.S. sanctions, in violation of the International Emergency Economic Powers Act (IEEPA); 10 counts of violating IEEPA; one count of conspiring to commit international money laundering; and ten counts of international money laundering.” In taking the plea deal Unsalan’s offenses were reduced to only the one count of money laundering conspiring.
The offense of conviction can be punished by up to 20 years in prison. However, in regards to the future sentencing, the Department of Justice has agreed to a downward adjustment under the U.S. Sentencing Guidelines (“U.S.S.G.”) of Unsalan’s U.S.S.G. “offense level,” based upon his acceptance of responsibility and his acceptance of a forfeiture judgement in an amount which will include the $160 million in illicit proceeds. Conversely, the parties agreed to “enhancements” to Unsalan’s U.S.S.G. offense level, based upon the fact that the conviction involved a count of money laundering, and because the offense allegedly involved “sophisticated laundering” and Unsalan allegedly acted as an organizer, leader, manager or supervisor in the offense. Based on Unsalan’s U.S.S.G. “total adjusted offense level,” and assuming that he has no criminal history, he should be facing an advisory sentence of 87 to 108 months of imprisonment, in the absence of any downward departures or variances to the advisory sentence based on other factors.
This investigation was conducted through the Justice Department’s “Task Force KleptoCapture”, an interagency law enforcement task force launched in May 2022 as a direct response to the Russian invasion of Ukraine. As we’ve previously blogged, Task Force KleptoCapture has been responsible for tracking down a number of schemes related to sanctions evasion by Russian oligarchs. Further, the Financial Crimes Enforcement Network recently has issued several analysis and alerts to financial institutions regarding sanctions violations and related illicit transactions – particularly those relating to Russia – as we have blogged here, here and here.