Three Years in Prison for Export Violations for Hong Kong Man

Jul. 22, 2024
By: Ashley J. Bodden

It is no secret funneling U.S.-manufactured military grade technology to end users in Russia is a violation of U.S. export control laws. It is becoming increasingly less of a secret that there is no apparent end to the number of individuals still procuring goods or services for end users in Russia despite the sanctions levied since Russia’s invasion of Ukraine. Finally, it has never been a secret that the United States will aggressively pursue violators of the export control laws. All three of these (non)secrets come together in the tale of Maxim Marchenko.

On July 17th, the Department of Justice (DOJ) announced Maxim Marchenko, a Russian who resides in Hong Kong, was sentenced to three years in prison followed by three years of supervised release for his role in procuring dual-use, military grade OLED micro-displays for Russian end users. Mr. Marchenko was first arrested back in September on charges that he and two other unnamed co-conspirators bought OLED micro-displays from U.S. distributors, who were told at the time that the products would be used for medical research in Hong Kong and China. The DOJ alleged that Mr. Marchenko used Hong Kong-based shell companies, including Alice Components Co. Ltd. (Alice Components), Neway Technologies Limited (Neway) and RG Solutions Limited (RG Solutions), to procure the products. The procured products included rifle scopes, night vision goggles, thermal optics and other weapon systems, which were shipped to third-party countries to conceal their final destination before they were forwarded to Russia. The DOJ alleged that one of the co-conspirator works for Russian electronics seller Infotechnika, and the other is a director at a Russian firm called NPC Topaz.

According to the sentencing memorandum, the prosecutors had asked for a sentence within the nonbinding guidelines of 57-71 months, as Mr. Marchenko’s shell companies funneled more than $1.6 million to the U.S. in support of procuring the OLED micro-displays to Russia. Although Mr. Marchenko did not have a criminal history, and his lawyers requested time served, the judge sentenced Marchenko to three years in prison. U.S. Attorney Damian Williams stated that the U.S. “will stop at nothing to hold accountable those who seek to circumvent our laws to gain access to some of our most sensitive technologies.” Assistant Secretary of Commerce Matthew S. Axelrod for Export Enforcement, also emphasized that the “sentencing is just the latest example of our unceasing efforts to target and disrupt illegal Russian procurement networks.”

The DOJ and US enforcement agencies continue to demonstrate their aggressive pursuit of violations of US sanctions and export control laws, including from non-US parties. The recent published enforcement actions against non-US companies and individuals demonstrate the US government’s broad range of enforcement authority, including civil penalties, denied export privileges, public designations denied access to the US financial system, imprisonment, civil and criminal forfeiture of property and funds, or a combination thereof. It is important not only for companies but also individuals to familiarize themselves with the requirements of US sanctions and export control laws.

Barnes Richardson has extensive experience with complex compliance, licensing, and enforcement matters. If you have any questions surrounding the applicability of sanctions or export controls on your company or a particular transaction, please contact any attorney at Barnes Richardson and Colburn.