Businessman pleads guilty to export, tax charges in connection with shipments of other sensitive technology to Russia

Date: Nov. 7, 2024

Contact: [email protected]

Earlier today, in federal court in Brooklyn, Ilya Kahn, a national of the United States, Israel and Russia, pleaded guilty to conspiracy to violate the Export Control Reform Act for his role in a transnational, multimillion-dollar scheme to secure and illegally export dual-use semiconductors and other sensitive technology to Joint Stock Company Research and Development Center ELVEES (Elvees) and other entities in Russia. Elvees, one of the leading Russian developers of microchips, was sanctioned by the U.S. government in 2022 for contributing to Russia's security services, military and defense sectors. Kahn also pleaded guilty to attempted tax evasion for failing to pay taxes on the illicit income he earned from the scheme. Kahn was arrested in January 2024.

The guilty pleas took place before United States District Judge Ann M. Donnelly. When sentenced, Khan faces up to 20 years in prison.

Breon Peace, United States Attorney for the Eastern District of New York, Matthew G. Olsen, Assistant Attorney General for the Justice Department's National Security Division, Thomas M. Fattorusso, Special Agent in Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), James E. Dennehy, Assistant Director in Charge, Federal Bureau of Investigation, New York Field Office (FBI), and Jonathan Carson, Special Agent in Charge, U.S. Department of Commerce, Office of Export Enforcement, Bureau of Industry and Security, New York Field Office, announced the plea.

"Semiconductors and other advanced electronics are the lifeblood of Russia's war machine, and Kahn's circumvention of U.S. export controls was critical to Russia's chip design and manufacturing capacity," stated United States Attorney Peace. "Today's plea marks a significant step in protecting the national security of the U.S. and our allies and partners abroad. We will continue to use all our law enforcement and national security tools to hold individuals and corporations accountable for flouting the law to aid sanctioned entities in Russia and elsewhere."

Mr. Peace extended his appreciation to the U.S. Attorney's Office for the Central District of California and the FBI's Los Angeles Field Office for their assistance in this case.

"Today's guilty plea is another step towards stopping the illicit flow of technology to support the Russian war machine," said Assistant Attorney General Matthew G. Olsen of the National Security Division. "The Department will continue to do all that we can to disrupt the illegal export of sensitive dual-use electronics to our adversaries and protect our national security."

"Khan aided Russian military and intelligence agencies by conspiring to unlawfully transfer sensitive technology to Russia, even after the 2022 invasion of Ukraine. Further, he pocketed millions in this scheme, but just like Al Capone, Kahn needed to pay tax to the U.S. government on his ill-gotten gains. This guilty plea means Kahn can no longer aid a foreign government for profit, and he is sure to give much of that money back in forfeiture and what he owes in taxes. Yes, criminals must pay taxes, even on dirty money," said Thomas M. Fattorusso, Special Agent in Charge of IRS-CI New York.

"By operating front companies to illegally export dual-use semiconductors and other sensitive technology, Illya Kahn aided a hostile nation at the expense of the security of our nation. The FBI and our partners will continue to ensure individuals attempting to evade national security sanctions are held accountable in the criminal justice system," stated FBI Assistant Director in Charge Dennehy.

"Working with our law enforcement colleagues, the Office of Export Enforcement will continue to investigate and dismantle sophisticated illegal procurement schemes that supply Russia's war effort,' said Special Agent in Charge Jonathan Carson. "Today's guilty plea should serve as another reminder that we will not tolerate violations of the sanctions imposed on Russia since the invasion of Ukraine."

Kahn is the owner of Senesys Incorporated and Sensor Design Association, which operated in California and Brooklyn, New York. Kahn operated these businesses - ostensibly involved in "security software development" and the testing of silicon wafers for military, avionics and space users - as fronts for a years' long conspiracy to acquire and export sensitive and sophisticated dual-use electronics from the United States to Elvees in Russia. Many of these items required an export license for national security and anti-terrorism reasons, which Kahn did not obtain.

Kahn also arranged for Elvees to continue to fabricate and import semiconductors after Russia's February 2022 invasion of Ukraine. These semiconductors can be used for, among other things, communications systems, GPS receivers and equipment for military unmanned aerial vehicles, also known as drones. In doing so, Kahn utilized a transnational network of front companies and bank accounts to ship those semiconductors to Russia following the invasion of Ukraine, often arranging for the semiconductors to be sent to the U.S. and then re-exported to Russia via China and other locations around the world.

In March 2022, the Commerce Department added Elvees to the Entity List, imposing a license requirement to export any item subject to the Export Administration Regulations to Elvees, and stating that it would review license applications under a policy of denial. Despite these sanctions, Kahn continued to work with Elvees. For example, in May 2022, Kahn emailed a Taiwanese manufacturer design guidance for an Elvees-branded microchip. Subsequently, Kahn shipped thousands of units of this microchip to a Hong Kong-based shipping company, and then to a company located in the mainland of the People's Republic of China. Kahn noted in communications with the Hong Kong shipping company that he received a "call from Russia" about the PRC business to which he was directing the goods.

Kahn's export activity for the benefit of Elvees dates to at least 2012, and accounts under his control received more than $50 million from Elvees and related entities between 2012 and 2022. Of that money, Kahn channeled nearly $5 million for his personal use, which he did not report to the IRS and on which he did not pay income taxes. As part of his plea, Kahn agreed to forfeit $4,923,548.94 in ill-gotten gains and to pay an additional $1,892,816.00 in restitution to the IRS.

Today's actions were coordinated through the Justice and Commerce Departments' Disruptive Technology Strike Force and the Justice Department's Task Force KleptoCapture. The Disruptive Technology Strike Force is an interagency law enforcement strike force co-led by the Departments of Justice and Commerce designed to target illicit actors, protect supply chains, and prevent critical technology from being acquired by authoritarian regimes and hostile nation states. Task Force KleptoCapture is an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions and economic countermeasures that the United States has imposed, along with its allies and partners, in response to Russia's unprovoked military invasion of Ukraine.

The government's case is being handled by the Office's National Security and Cybercrime Section. Assistant United States Attorneys Artie McConnell and Matthew Skurnik are in charge of the prosecution, along with Trial Attorney Scott Claffee of the National Security Division's Counterintelligence and Export Control Section, with assistance from Litigation Analysts Emma Tavangari and Mary Clare McMahon. Assistant U.S. Attorney Laura Mantell of the Office's Asset Recovery Section is handling forfeiture matters.

IRS-CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. IRS-CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.

Public link

Please use the above public link if you want to share this noodl on another website.