Zorba the thief: How the Serniya smuggling network and a Greek mathematician helped the FSB buy military technology

RU

How Serniya circumvented sanctions

On December 5, 2022, a grand jury in New York handed down indictments against five Russians and two US citizens of Russian origin. The charges include conspiracy to defraud the United States, financial fraud, money laundering, export control violations, and smuggling. According to the indictments, the Russians (names listed here) funneled millions of dollars through their organizations, supplying Russia with military and dual-use technologies.

The accused parties placed orders for goods from US firms, deliberately providing false information about the intended recipients. They then repackaged the products and sent them to transshipment points in Estonia, Finland, Germany, and Hong Kong. From there, the shipments were ultimately delivered to Russia. Payments for the contraband were also routed through a network of front companies around the world. According to the indictment, the clients of this network, called Serniya, included Russian state corporations Rostec, Rosatom, and Rusnano, as well as the Moscow Engineering Physics Institute (MEPhI), Russia’s Ministry of Defense, Foreign Intelligence Service (SVR), Federal Security Service (FSB) and its agencies — including the Department of Military Counterintelligence and the Directorate of Scientific and Technical Intelligence.

Serniya companies served as suppliers of cutting-edge equipment through government contracts. The central core of the Serniya network handled government contracts worth 5.2 billion roubles ($56.3 million), while peripheral companies took care of procurements worth 1.2 billion roubles ($12.98 million).

Here's how the scheme unfolded: Ippolitov received orders from Russian clients and then relayed them to Sertal employees Grinin and Skvortsova. They worked out financing and transportation routes and instructed former Brooklyn resident Boris Livshits to order products from American firms. Livshits (sometimes posing as the nonexistent David Vetsky) kept shell companies and bank accounts in New York, which he used for shipments. To facilitate the operation, US citizens Bryman and Ermolenko falsified transportation documents and invoices, and they also repackaged the goods — often at Bryman's home. The final step involved reshipping the products to their transshipment points. Taking the wheel, the driver Konoschenok personally transported the contraband across the Estonian border.

An Orthodox smuggler

According to the indictment, in October 2017, the director of product promotion at Sertal proposed Nikolaos Bogonikolos as a potential partner, citing his support for Orthodox Christianity as a basis for fostering friendship with Russia.

Bogonikolos, a trained mathematician, earned his PhD in economics from the Kharkiv State University of Economics in 2005. His LinkedIn page proudly lists his business operations in various countries, including Greece, Belgium, UK, Germany, Netherlands, Ukraine, Russia, and Bulgaria. It also boasts of his projects' total budget, which exceeds €1 billion.

Bogonikolos' Aratos group of companies had worked closely with NATO. In 2021, Aratos Systems achieved recognition as a finalist in the NATO Innovation Challenge competition for its space technology applications in security and defense. Another company affiliated with Bogonikolos, Forceapp BV, operates in the defense sector from its base in the Netherlands. Forceapp proudly emphasizes its role in bringing cutting-edge technologies to the forefront, providing solutions in defense and homeland security. Their expertise centers around space technology for defense, blockchain for defense applications, counter-drone systems, and research and development in the defense and security domains. Bogonikolos serves as a “strategic advisor” to Forceapp, with claims of extensive experience in advising the European Commission, European Parliament, and various governments worldwide. While it remains uncertain whether he served as an actual advisor to the European Commission, he did manage a study for the European Parliament in the past.

Bogonikolos flew to Moscow on December 28, 2017. On the same day, he was called to visit the Serniya laboratories. Judging from correspondence in which Bogonikolos mentions “sensitive equipment,” he was aware that he would have to violate US export laws.

Russian armored vehicles masquerading as Dutch yachts

In February 2018, Evgeny Grinin from Serniya attempted to order precision measuring equipment from Minnesota. The Americans declined his initial direct request. Then, Bogonikolos stepped in and agreed to place the order, but with the addition of a few extra items to avoid raising suspicion in Minnesota.

In another case in November 2019, while communicating with the company Photon Pro, Bogonikolos acknowledged the need to falsify the final user declaration by listing a Dutch company, knowing well that the goods were intended for Serniya and destined for Russia. On the same day, in a conversation with an Aratos Group employee, Bogonikolos admitted that the blank declaration he would fill out for his company referred to an order “for the Russians.”

In February 2018, Evgeny Grinin from Serniya attempted to order precision measuring equipment from Minnesota. The Americans declined his initial direct request. Then, Bogonikolos stepped in and agreed to place the order, but with the addition of a few extra items to avoid raising suspicion in Minnesota.

In another case in November 2019, while communicating with the company Photon Pro, Bogonikolos acknowledged the need to falsify the final user declaration by listing a Dutch company, knowing well that the goods were intended for Serniya and destined for Russia. On the same day, in a conversation with an Aratos Group employee, Bogonikolos admitted that the blank declaration he would fill out for his company referred to an order “for the Russians.”

Between 2018 and 2020, Bogonikolos procured ten NATO tactical antennas for the Aratos Group. These antennas were specifically designed for armored combat crews in warfare environments, adhering to NATO's military standard. To facilitate the purchase, he informed the Florida-based manufacturing company that the antennas were destined for private pleasure yachts in the Netherlands. Exporting these antennas to Russia would have required an export license. Correspondence between Grinin and Bogonikolos revealed that Serniya was the true buyer.

In January 2021, Alexei Ippolitov sent Grinin and other Serniya employees a list of orders from major Russian scientific and educational institutions involved in the development of quantum computers. The products were intended for defense and dual-use technologies, particularly for the development of a military quantum computer to create “prototype quantum cryptographic complex equipment used in information security” and “secure quantum communication networks for civilian and military purposes in conditions of war.”

Bogonikolos was tasked with providing the necessary lasers from California for this project. “F2, F3, F4 - Kolya,” Grinin wrote in a letter to one of his employese, meaning that the lasers codenamed F2, F3, and F4 would be handled by Bogonikolos [“Kolya” is a Russian diminutive nickname for “Nicholas” — translator’s note]. The Aratos Group then placed an order for the three lasers from a California-based manufacturing firm. While communicating with the manufacturer, Bogonikolos signed documents — knowing they contained false information — stating that he was the ultimate user of the equipment being purchased.

In 2019, Bogonikolos, working through Grinin, assisted the Russian university MEPhI in purchasing 30 high electron mobility transistors from a US company in North Carolina. The export of these transistors to Russia requires a government license. The end-user declaration was issued to Bogonikolos's firm, but the actual delivery was made to Majory, a UK-based legal entity, before being forwarded to Russia.

In the same year, Bogonikolos aided Grinin in acquiring a low-noise cesium frequency generator from Colorado. Transporting this $143,000 generator to Russia would have also required an appropriate export license. However, it too made its way to Russia through Majory.

In 2020, Bogonikolos, once again operating through the Aratos Group, placed an order for 20 digital-to-analog converters (DACs) and shipped them to Photon Pro. The DACs were intended for a Russian customer from the Serniya network, who communicated with Ippolitov and Grinin using the email [email protected]. The email signature featured the designation of military unit 33949, which, as it turns out, was the ultimate recipient of the DACs. This military unit is a part of Russia's Foreign Intelligence Service (SVR). The end-user declaration was issued to Bogonikolos's company in the Netherlands, but the DACs traveled to Russia through a transshipment point in Hamburg, Germany.

In 2021, Bogonikolos ordered a “Hi-Resolution phase and Frequency Offset Generator” from Colorado and “microwave tunable notch filters” from Maryland. In the declaration, Bogonikolos' firm claimed that the equipment would be utilized in a laboratory in the Netherlands for the development of satellite and radio equipment. In reality, the products were routed through Photon Pro, and eventually ended up at Russia's VNIIFTRI (the All-Russian Scientific Research Institute for Physical-Engineering and Radiotechnical Metrology).

In August 2022 — after sanctions were imposed on several firms within the Serniya network — Bogonikolos proceeded to order a high-power gallium nitride solid-state power amplifier (with frequencies ranging from 6 to 12 GHz) from California. Bogonikolos once again wrote up an end-user declaration for Aratos Group.

The end of Serniya

Vadim Konoschenok, the smugglers’ driver, was detained in Narva in November 2022 while trying to transport 20 cases of US-manufactured bullets into Russia. The incident occurred after Estonian border guards foiled his previous attempt in October to smuggle semiconductors, other electronic components, and thousands of sniper rifle bullets through the same location. Authorities discovered over 150 kilograms of ammunition in his Estonian warehouse. Konoschenok was extradited to the United States in July this year. Bryman surrendered to the FBI, and Yermolenko was arrested in New Jersey last December.

Despite the arrests, the multi-year scheme appears to have proven profitable for some. Evgeniya Bernova and Victor Grigoryan, both associated with the network, acquired La Tarante, a luxurious villa in France's Cap d'Antibes valued at nearly €3 million. The property is owned through the civil company SCI Griber.

The couple enjoyed spending time in Europe through their Maltese citizenship, which Bernova has since lost due to sanctions.

What lies ahead for Bogonikolos

On May 23, prosecutor Breon Peace filed a motion requesting the court to arrest Bogonikolos, citing various reasons as to why the defendant should not be released on bail. According to Peace, one significant factor is Bogonikolos’ association with Bulgarian General Valentin Tsankov, who was arrested in 2022 on suspicion of spying for Russia. Tsankov, previously a Bulgarian military attaché and NATO adviser, was removed from his positions after his ties to communist intelligence services came to light. According to US prosecutors, General Tsankov is connected to the Bulgarian firm Hemus Technologies, which was founded by Bogonikolos.

Based on the arrest motion, it appears that the US authorities possess more information about Bogonikolos than what has been disclosed in the indictment so far. For instance, the motion claims that Bogonikolos transmitted an 85-page analytical report on Dutch space policy and defense strategy in space to one of his Russian counterparts using an encrypted communication channel. While the US might not have jurisdiction to charge Bogonikolos with spying for Russia, the upcoming trial could reveal intriguing details. However, there's a possibility of an exchange if he becomes part of a negotiation deal.

The structure of the Serniya network

If we compare data from Russia’s Unified State Register of Legal Entities (EGRUL), customs operations and government contracts, the approximate structure of this smuggling octopus becomes apparent. The Serniya network was made up of three types of companies: foreign exporting firms, Russian importing firms, and Russian contracting firms (which can be used to make out the network’s “core” and “periphery”). These companies are intricately interconnected through shared directors, founders, addresses, and telephone numbers.

The foreign companies within the Serniya network (listed here) were only intended for export-import operations (let's call these firms “trade agents”).

Approximately 20 individuals (listed here), were associated with Serniya's “trade agents” at various points in time. These firms were instrumental in supplying Russia with advanced high-tech equipment, including optical and electronic components. Other items included lasers, optical communication equipment, high-precision scientific instruments, electronics, microchips, and equipment used in their production, all amounting to a total value of $89.1 million.

These firms within Serniya's network are closely interlinked with Russian companies through shared former and current directors and founders.

The “trade agents” had virtually exclusive partners in Russia that did nothing but import.

Serniya’s “core” firms, which secured a substantial number of government contracts, had connections with the importers through common former and current founders, co-owners, addresses, and telephone numbers. They received a portion of imports directly from the “trade agents.” These “core” firms were also entrusted with executing state contracts, supplying sophisticated equipment to various Russian government agencies and organizations.

Serniya Engineering LLC primarily catered to scientific institutes as its main clientele. Meanwhile, Sertal LLC fulfilled government contracts almost exclusively for the Russian Academy of Sciences’ Institute of Nanotechnology of Microelectronics (INME RAS).

Serniya Ltd. was involved in projects not only with civilian universities and institutes, but also with Russia’s special services. It provided services to military unit 43753 (the FSB’s Information Protection and Special Communications Center), and assisted in the development of special communications (FSUE NPP Gamma). CJSC Serniya-SPb also engaged in supplying both civilian universities and the FSB's military unit 45187.

Sertec LLC received contracts from the State Regional Center for Standardization, Metrology and Testing in St. Petersburg and Leningrad Region, St. Petersburg State Electrotechnical University (LETI) and other universities and scientific organizations, as well as rocket engine builders from the Fakel Design Bureau.

Lastly, NPO Serniya carried out orders for special services, supplying equipment to the FSB military units 43753, 95006, and 35533, along with the Military and Technical Supply Department of the FSO's Economic Support Service.

Some companies were not part of the network, but used the services of Serniya’s “trade agents.”

The “periphery” of the Serniya network was also made up of Russian firms that were affiliated with Serniya through founders, managers, addresses, and telephone numbers. While many of these firms did not handle imports themselves, they had government customers.

Lan-Project LLC seems to have been independent of the Serniya network, but it utilized Serniya's services to procure vacuum and X-ray equipment. Its state contracts amounted to 1.6 billion roubles ($17.3 million), which included the supply of specialized equipment for the FSB.

Both Serniya Engineering and Sertal were added to US sanctions lists in March 2022. Serniya's connections with the FSB were explored in a Radio Liberty investigation titled “Adventures of Electronics.” Notably, supplies of US-made equipment for the FSB have been routed through Serniya since the 2000s.

Serniya’s clients

Serniya dealt with various entities in Russia, such as government agencies, sectoral research institutes, design bureaus, and factories associated with defense, space, and law enforcement agencies. It also served fundamental scientific institutes and universities as part of its clientele.

Serniya’s services were used by the following Russian government agencies:

• Ministry of Industry and Trade,
• Federal Drug Control Service (FSKN),
• Federal Protective Service (FSO),
• Federal Penitentiary Service (FSIN).

The most critical special services units, research institutes, design bureaus and factories that worked through Serniya operated in the following areas:

• Military Unit 35533 is the FSB’s No. 1 Research Division (US citizen Alexander Fishchenko received a 10-year prison sentence for unlawfully importing electronics, supposedly intended for the production of traffic lights in Russia. One of the recipients of these electronics was Military Unit 35533).
• Military Unit 55056 is the FSB’s logistics department, formerly known for its extravagant purchases.
• Military Unit 43753 is the FSB’s Center for Information Protection and Special Communications.
• Military Unit 68240 is the FSB’s Operational and Technical Directorate.
• Military Unit 95006 is likely the Special Objects Service of the Main Directorate of Special Programs of the President of Russia (GUSP), allegedly responsible for maintaining special bunkers.
• The Scientific-Research Institute of Communications and Command and Control (NIISSU) develops communications systems for Russia’s military.
• The Central Research Institute of Chemistry and Mechanics (TsNIICHM) was in charge of “development and production of advanced types of ammunition and rocket technology”; it was also mentioned in the investigation of Alexei Navalny's poisoning.
• TsNII Elektropribor is “Russia's leading institute in the field of high-precision navigation, gyroscopy and gravimetry.”
• NPP Gamma is involved in secure communications systems for law enforcement agencies.
• JSC GZ Pulsar produces semiconductors for military and space applications.
• JSC OKB Fakel develops electric rocket engines.
• SVEKO is a company owned by the Federal Protective Service (FSO).
• The All-Russian Research Institute for Optical and Physical Measurements (VNIIOFI) is a national metrological institution assuring the uniformity of measurements in photometry, radiometry, and a number of other fields.
• The All-Russian Scientific Research Institute for Physical-Engineering and Radiotechnical Metrology (VNIIFTRI) is a metrological institute assuring the uniformity of time standards.

Multiple universities and fundamental science institutes also used the Serniya network's services:

• Moscow State University (MSU),
• Moscow Institute of Physics and Technology (MIPT),
• MIREA — Russian Technological Univeristy,
• The Lebedev Physical Institute of the Russian Academy of Sciences (FIAN),
• Institute of Strength Physics and Materials Science of the Siberian Branch of the Russian Academy of Sciences (IFPM SB RAS),
• Institute of Nanotechnology of Microelectronics of the Russian Academy of Sciences (INME RAS).