The Office of Foreign Assets Control (OFAC) has issued a Penalty of $7,139,305
on Gracetown, Inc., a property management company based in New York, for violating
OFAC’s Ukraine-/Russia-Related sanctions and for failing to file reports of blocked assets.
Between April 2018 and May 2020, Gracetown received 24 payments on behalf of a company
ultimately owned by a sanctioned Russian oligarch, Oleg Deripaska, despite having received
explicit prior notice from OFAC that direct and indirect dealings with Deripaska were prohibited.
Gracetown also failed to report blocked assets in its possession and control for over 45 months. The
penalty amount reflects OFAC’s determination that the violations were egregious and were not
voluntarily self-disclosed.
Gracetown was established in 2006 for the purpose of managing three luxury real estate properties
in New York and Washington, D.C., which Deripaska purchased around the same time through
various legal vehicles. To manage the three properties, Gracetown relied on funds and direction
from Deripaska-affiliated Russian individuals who oversaw its operation. From 2006 to 2018,
Deripaska was the ultimate beneficial owner of Gracetown. In the months leading to Deripaska’s
designation as a blocked person, a relative and known associate of Deripaska, became the ultimate
beneficial owner of Gracetown. Throughout all relevant times, Gracetown employed a property
manager based in New York, who managed Gracetown’s bank accounts based on instructions from
its Russia-based stakeholders.
In 2013, Baufinanz, a British Virgin Islands-based company also owned by Deripaska, entered into
a settlement agreement with an unrelated U.S. person over a loan dispute. Pursuant to the
agreement, Gracetown was to receive regular monthly payments from the U.S. person that were due
to Baufinanz. In November 2013, Deripaska’s relative and known associate informed Gracetown of
the initial incoming payment and initiated an arrangement for Gracetown to account for the
payments as a loan from Baufinanz and to use the funds to manage the New York and D.C.
properties. Gracetown’s property manager did as instructed, received and deposited the payments
to Gracetown’s bank account as a loan from Baufinanz beginning on December 19, 2013. In early
2018, just prior to Deripaska’s designation, Deripaska’s relative and known associate became the
ultimate beneficial owner of Gracetown.
OFAC also issued Gracetown a Notification of Blocking (the “Notification”) via
certified mail, which Gracetown’s registered agent received on April 10, 2018. The Notification
formally notified Gracetown that Deripaska—its former owner, from 2006 to early 2018—had been
designated, and that, as a result, all property and interests in property of Deripaska were blocked as
of that date. The Notification explained to Gracetown that this meant all unauthorized dealings with
Deripaska, his property or interest in property, or any other blocked person, would be unlawful and
may result in a monetary penalty. The Notification further informed Gracetown of its legal
obligation to block all property in its possession in which Deripaska had an interest and report such
property to OFAC within 10 business days.
Despite receiving this Notification, Gracetown nevertheless continued its arrangement with
Baufinanz, receiving regular monthly payments on its behalf until May 2020, when the terms of the
settlement were fulfilled. As of April 6, 2018, Gracetown had already received and spent—and
therefore owed Baufinanz—a total of $72,500, a debt that became blocked property (and thus
required reporting) upon Deripaska’s designation. Subsequently, from April 24, 2018, to May 7,
2020, Gracetown received 24 additional payments totaling $31,250. Consistent with the
instructions from Deripaska’s relative and known associate, who later became Gracetown’s new
owner, Gracetown utilized the relevant payments as a loan from Baufinanz to help cover property
management-related expenses, resulting in an increased accumulated debt of $103,750 to
Baufinanz.
Jeffrey Newman is a whistleblower lawyer, whose law firm represents whistleblowers revealing violations of export controls, tariff evasions, money laundering, healthcare fraud and other kinds of WB cases. The firm represents individuals both in the United States and other countries. Mr. Newman and his firm also represent physicians and other healthcare providers who become whistleblowers in healthcare fraud cases. Whistleblower laws in the U.S. allow individuals anywhere with information about export control violations or tariff fraud to reveal the information under The False Claims act or through the Securities and Exchange Commission’s Whistleblower Program. The Firm’s website is at www.JeffNewmanLaw.com and attorney Newman can be reached at Jeff@Jeffnewmanlaw.com or at 978-880-4758
