Estonia Extradites Russian Citizen to Face Charges in US Over Smuggled Microelectronics Exports

Valery Kosmachov was extradited from Estonia to face federal charges in the U.S. related to a "scheme to illegally procure sophisticated electronic components" and smuggle them to Russia, the Department of Justice said in a March 20 news release. The indictment was filed in September 2017 but was only unsealed on March 20, said the U.S. Attorney’s Office for the Northern District of California. Kosmachov was arrested in September 2018 and extradited to the U.S. on March 14, the DOJ said.

Kosmachov and an alleged co-conspirator, Sergey Vetrov, were charged in the indictment, it said. Vetrov and Kosmachov, a Russian national and naturalized citizen of Estonia, used their Estonia-based companies "as procurement 'fronts' to obtain controlled U.S.-origin microelectronics, in part by misrepresenting that the end-users for the components were located in Estonia," the DOJ said. "The components included dual-use programmable computer chips capable of operating in austere environments making them useful in both civilian and military applications. Once in possession of the chips in Estonia, the co-defendants allegedly later smuggled them into the Russian Federation, in part by using laundered funds."

The DOJ said "Kosmachov, Vetrov, and their two companies are charged with one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) and one count of conspiracy to commit international money laundering." While Kosmachov is scheduled to next appear in court on March 28, Vetrov remains "at large," the DOJ said.

A conviction could result in a lengthy sentence for Kosmachov. He faces "a maximum 20-year term of imprisonment for each IEEPA and money laundering-related count, and a maximum 10-year sentence for each count of smuggling," the DOJ said. The prosecution follows an investigation that involved the Bureau of Industry and Security, Homeland Security Investigations, CBP, the Internal Revenue Service and the U.S. Marshals Service, with assistance from the DOJ's Office of International Affairs.

A BIS export privileges denial order from 2018 may describe some of what is alleged in the indictment, which the DOJ didn't immediately make available. Eastline Technologies OU, a company co-owned by Kosmachov and Vetrov, created an Electronic Export Information filing in the Automated Export System that listed Estonia as the ultimate destination and Eastline as the ultimate consignee, even though Eastline admitted that was not the case. "Based on a review of EEI filings in AES for 2018, Eastline continued to order U.S.-origin items and have them delivered to its package forwarder in the U.S., for consolidation and export," BIS said.

Among other things, the BIS Office of Export Enforcement said it was concerned that the "strategy of using a package forwarder in the United States to consolidate orders placed with multiple U.S. manufacturers or suppliers, rather than having the items exported directly by the manufacturers or suppliers themselves, may be part of a concerted effort to conceal their activities."