OFAC Wrongly Accused US Trust of Aiding Sanctioned Russian Oligarch, Lawsuit Says
The Russian grantor of a blocked U.S.-based trust company is suing the Office of Foreign Assets Control, saying OFAC falsely accused the trust of being used to help a Russian oligarch evade sanctions. Kuncha Kerimova, the grantor, said the trust was designed to share her wealth with her grandchildren and other descendants, not to aid designated Russian billionaire Suleiman Kerimov.
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The suit comes more than three years after OFAC, in what the lawsuit called an "extraordinary action,” publicly announced that it had issued a blocked property notification to Heritage Trust, making it subject to the same sanctions restrictions as Kerimov. OFAC in June also fined a California-based venture capital firm more than $215 million -- the maximum civil fine it could have imposed -- for its alleged role in a scheme to illegally manage an investment for Kerimov, including by transferring shares owned by Heritage Trust (see 2506120076).
Kerimova told the U.S. District Court for the District of Columbia that OFAC “falsely claimed” that Heritage Trust was formed to hold and manage Kerimov’s U.S. assets. This allegation “has no basis in reality,” the lawsuit said, noting that Kerimov was “specifically identified as a Prohibited person” in the trust agreement, barring him from receiving any assets. The suit also said the “history of Heritage Trust, the trust documents, the manner in which the trust has been managed, and prior communications” with OFAC prove that the agency is wrong.
“OFAC’s determination that the Heritage Trust constitutes blocked property defies reasoned decision-making, contradicting information believed to be within OFAC’s possession,” the suit said.
Kerimova created the Heritage Trust under Delaware laws in 2017, and Kerimov “did not hold any position” or exercise any influence or control over it. OFAC’s 2022 blocked property notification announcement of Heritage Trust also named Kerimov’s nephew, Ruslan Gadzhiyevich Gadzhiyev, as having ties to the trust. After Gadzhiyev was sanctioned in 2022, the lawsuit said, Gadzhiyev “could no longer be a potential beneficiary to the Heritage Trust.”
But the lawsuit said the controllers of the Heritage Trust used a license, General License No. 34, that authorized certain wind-down transactions by a U.S. trust to any Russian person that would normally be blocked. “As a result, a decision was made to undertake certain wind-down activities relating to the Trusts and to transfer the Trusts’ assets outside of the United States,” including by moving them to the Beta Foundation, an entity organized in Liechtenstein.
Kerimova directed the distribution of all of the trust’s funds to Ali Gadzhiev, who would then move the assets to the Beta Foundation. The lawsuit stressed that Ali Gadzhiev wasn’t subject to sanctions.
But before those assets could be moved, OFAC notified the trust that its assets were blocked property. OFAC said it had “reason to believe” that both Kerimov and Ruslan Gadzhiyev each had an interest in the trust “based on, among other things, a review of the Trust provisions and its course of investments.”
Because the trust is blocked, Kerimova hasn’t been able to share her “generational wealth” -- which OFAC estimated to be about $1 billion worth of assets in the trust -- with her “non-sanctioned descendants,” the lawsuit said. “Ms. Kerimova is unclear as to how U.S. sanctions policy objectives are realized by the continued blocking of a Trust in which no U.S.-sanctioned persons have an interest, directly or otherwise.”
It also said Kerimova hasn’t been able to challenge the move because the trust wasn’t added to OFAC’s Specially Designated Nationals List -- it was just publicly identified by the agency as blocked property. The agency’s sanctions delisting procedures don’t outline how someone can petition for an entity to be unblocked if it’s not on the SDN List.
OFAC has prevented Kerimova from “mitigating the substantial harm caused by failing to promulgate procedures by which interested persons can contest OFAC’s wrongful determination and by functionally barring trust fiduciaries from acting in defense of the trusts.”
The suit said OFAC’s blocking of the trust is an arbitrary and capricious agency action under the Administrative Procedure Act, and the agency is violating Kerimova’s due process rights by failing to give her an avenue to contest the decision. Kerimova is asking the court to order OFAC to unblock the trust, create procedures by which parties can petition for the unblocking of trusts in the future, and award other “relief.”
An OFAC spokesperson didn’t respond to a request for comment.