Guernsey-based Prosperity Investments, LP, linked to OFAC $216 million fine on GVA Capital Ltd

The Office of Foreign Assets Control (OFAC) has issued a Penalty Notice imposing a $215,988,868 penalty on GVA Capital Ltd., a venture capital firm domiciled in the Cayman Islands and operating out of San Francisco, for violating OFAC’s Ukraine-/Russia-related sanctions and for failing to comply with an OFAC subpoena. 

Between April 2018 and May 2021, GVA Capital knowingly managed an investment for sanctioned Russian oligarch Suleiman Kerimov while aware of his blocked status.

GUERNSEY

• Prosperity Investments, LP, a Guernsey-based entity, played a significant role in the OFAC penalty imposed on GVA Capital Ltd.
• THE Guernsey entity was owned by a U.S. trust of which Kerimov had a beneficial interest; it was a blocked entity
• This entity was controlled by Russian oligarch Suleiman Kerimov and was used to channel a $20 million investment into a GVA Capital-backed company.
• In 2016, before the imposition of U.S. sanctions, GVA Capital’s senior leadership met with Kerimov to discuss a potential investment in a U.S. company.

• Following the meeting, Kerimov referred GVA Capital to his nephew, Gadzhiyev, for further coordination. Subsequently, a $20 million investment was made through a Guernsey-based entity in which Kerimov retained an interest in a GVA Capital-backed company.
• In 2016, GVA Capital officials met with Kerimov at his estate in France to secure his investment approval. 
• In April 2018, OFAC sanctioned Kerimov.  GVA Capital continued managing these investments by working through Kerimov’s nephew, Nariman Gadzhiev, who GVA Capital knew served as Kerimov’s proxy.

OFAC designated

• Kerimov in April 2018 for his role as a Russian government official, and
• Gadzhiyev was also designated in 2022.

Following Kerimov’s designation, GVA Capital allegedly obtained a legal opinion.

• Asserting that the Guernsey entity was not blocked because it was not nominally owned 50 per cent or more by a person on the SDN List.
• OFAC later found this conclusion incorrect, concluding that because the Guernsey entity was owned by a U.S. trust of which Kerimov had a beneficial interest, it was a blocked entity.

Under OFAC regulations, sanctions may apply broadly to any asset where a blocked person holds a direct or indirect interest.

• GVA Capital’s potential reliance on an incorrect or incomplete legal opinion highlights the importance of obtaining well-developed legal analyses of potential sanctions risks.
• Kerimov’s alleged beneficial interest in the U.S. trust rendered the entire trust a blocked entity, regardless of whether Kerimov held more than 50% of the trust interests.
• OFAC’s “50% rule” applies to companies, and in other contexts, such as the analysis of trust or real property interests, any interest of a blocked person renders the entire asset blocked.
• Consequently, the Guernsey entity, owned by a blocked trust, was itself blocked.

OFAC’s rules in this regard are sometimes misapplied by parties in the context of complex offshore and trust structures.

LONG READ

Overview

• On June 12, 2025, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) imposed a $215,988,868 penalty on GVA Capital Ltd. (“GVA Capital”), a San Francisco based venture capital firm, for violating Ukraine/Russia related sanctions programs and reporting obligations.
• According to the enforcement release, GVA Capital is alleged to have knowingly managed investments for Russian oligarch Suleiman Kerimov (“Kerimov”) despite his designation in April 2018 as a Specially Designated National (“SDN”) — a blocked person with whom U.S. persons cannot conduct or facilitate business. In 2016, GVA Capital representatives reportedly met with Kerimov in France to obtain his direct approval for investment activities.
• Following Kerimov’s designation as a sanctioned individual in April 2018, GVA Capital allegedly continued managing his investments indirectly through Nariman Gadzhiev (“Gadzhiev”), Kerimov’s nephew, whom GVA Capital is said to have recognised as acting on Kerimov’s behalf.
• The approximately $216 million penalty is the statutory maximum civil monetary penalty that OFAC could impose in this circumstance. It highlights the importance of “gatekeepers” such as GVA Capital and other financial institutions in preventing the evasion of U.S. sanctions programs.

Background of the Violations

• In 2016, before the imposition of U.S. sanctions, GVA Capital’s senior leadership met with Kerimov to discuss a potential investment in a U.S. company.
• Following the meeting, Kerimov referred GVA Capital to his nephew, Gadzhiyev, for further coordination. A $20 million investment was subsequently made through a Guernsey-based entity in which Kerimov retained an interest, into a GVA Capital-backed company.
• OFAC then designated Kerimov in April 2018 for his role as an official of the Russian government, and Gadzhiyev was also later selected in 2022. Following Kerimov’s designation, GVA Capital allegedly obtained a legal opinion asserting that the Guernsey entity was not itself blocked because it was not nominally owned 50 per cent or more by a person on the SDN List.
• OFAC later found this conclusion incorrect, concluding that because the Guernsey entity was owned by a U.S. trust of which Kerimov had a beneficial interest, it was a blocked entity.
• Under OFAC regulations, sanctions may apply broadly to any asset where a blocked person holds a direct or indirect interest. GVA Capital’s potential reliance on an incorrect or incomplete legal opinion highlights the importance of obtaining well-developed legal analyses of potential sanctions risks.
• In April 2021, OFAC identified a pending transfer of shares to the same U.S. trust structure that they believed Kerimov held a beneficial interest in. Following an investigation, OFAC determined that the shares were ultimately owned by Heritage Trust, a Delaware trust established in July 2017 to hold and maintain U.S. assets for Kerimov, who, despite his designation, retained an interest. Subsequently, on June 23, 2022, OFAC issued a Notification of Blocked Property to Heritage Trust, which held approximately $1.3 billion in assets, thereby preventing the liquidation and transfer of those assets from the United States.
• Around this time, OFAC also initiated an investigation into GVA Capital to evaluate its relationship with Kerimov. The investigation concluded that GVA Capital violated U.S. sanctions by engaging in dealings with Kerimov and further breached OFAC regulations by failing to fully and promptly respond to an OFAC subpoena.
• As part of its investigation, OFAC issued an administrative subpoena to GVA Capital in June 2021. In response, GVA Capital initially submitted approximately 173 documents. However, more than two years later, and only after receiving a pre-penalty notice, GVA Capital produced an additional 1,300 documents it claimed were also responsive to the original subpoena. OFAC determined that this 28-month delay in response constituted 28 distinct violations of its reporting requirements, separate from the underlying sanctions violations related to Kerimov. Under OFAC’s Enforcement Guidelines, penalties may be assessed for each month a party fails to comply with an obligation to furnish required information. Accordingly, the statutory maximum civil monetary penalty applicable in this matter was $215,988,868: $214,000,000 concerning GVA Capital’s Ukraine-/Russia-related violations and $1,988,868 concerning GVA Capital’s reporting violations.
• In evaluating the penalty under its guidelines, OFAC identified several aggravating factors in GVA Capital’s conduct. First, GVA Capital willfully violated U.S. sanctions by knowingly facilitating Kerimov’s investment in a U.S. company through the Guernsey entity, despite having actual knowledge of Kerimov’s continued interest in the assets. Senior management engaged directly with Kerimov and his cousin, Gadzhiyev, even after Kerimov’s 2018 designation. GVA Capital also disregarded legal advice received in May 2018, warning that any sale or transfer involving Kerimov would violate OFAC regulations.
• Second, GVA Capital’s actions undermined U.S. foreign policy by enabling a sanctioned individual to benefit from the U.S. financial system. Kerimov’s investment appreciated significantly, and GVA Capital made multiple attempts to transfer or sell the interest, conferring potential economic benefit upon Kerimov, an SDN.

Key Recommendations

• There is no “50% Rule” for Trust Interests: Kerimov’s alleged beneficial interest in the U.S. trust rendered the entire trust a blocked entity, regardless of whether Kerimov held more than 50% of the trust interests. OFAC’s “50% rule” applies to companies, and in other contexts, such as the analysis of trust or real property interests, any interest of a blocked person renders the entire asset blocked. Consequently, the Guernsey entity, owned by a blocked trust, was itself blocked. OFAC’s rules in this regard are sometimes misapplied by parties in the context of complex offshore and trust structures.
• Intermediaries and Complex Structures Offer No Shield to U.S. Sanctions: Using offshore entities, trusts, or intermediaries like relatives or nominees does not insulate a transaction from OFAC scrutiny. If a sanctioned individual retains a cognizable interest, OFAC will treat the asset as blocked, regardless of how many layers are involved.
• Actual Knowledge and Willful Conduct Are Heavily Penalised: OFAC emphasised that GVA Capital’s senior management knew Kerimov’s involvement and continued to engage with him post-designation. Willful violations, especially those involving high-level personnel, significantly increase enforcement risk and penalties.
• Delayed or Incomplete Subpoena Responses Potentially Compound Liability: GVA Capital’s 28-month delay in fully responding to an OFAC subpoena resulted in 28 separate reporting violations. This action clarifies that OFAC expects timely, complete, and accurate responses from subpoena recipients to avoid significant fines.
• Gatekeepers Must Uphold Sanctions Integrity: Venture capital firms, such as GVA Capital, fund managers, and other financial intermediaries play a critical role in sanctions compliance. OFAC’s maximum penalty in this case underscores the expectation that such entities act as frontline enforcers of U.S. sanctions policy.
• Legal Opinions Must Be Thorough and Fact-Specific: Reliance on outside counsel is not a defence if the legal advice is based on incomplete facts or a superficial understanding of OFAC rules. In this action, OFAC criticised GVA Capital’s reliance on a legal opinion that failed to adequately address risks arising from a sanctioned party’s indirect interests. However, the opinion generally warned against the sale or transfer of shares of the U.S. company that directly or indirectly involved Kerimov.

SOURCE

• U.S. DEPARTMENT OF THE TREASURY OFFICE OF FOREIGN ASSETS CONTROL https://ofac.treasury.gov/media/934366/download?inline
• OFAC Imposes Largest-Ever Penalty on Nonbank Financial Institution for https://www.lowenstein.com/news-insights/publications/client-alerts/ofac-imposes-largest-ever-penalty-on-nonbank-financial-institution-for-egregious-and-sustained-sanctions-violations-a-216m-warning-to-us-fund-managers-know-your-investors-aml
• OFAC Announces 216 Million Penalty on San Francisco Venture https://www.lexology.com/library/detail.aspx?g=00219ff5-3315-4600-b926-ec4a1dd9e0ec
• Sanctions evasion in Silicon Valley: Inside GVA Capital’s $216 million https://vinciworks.com/blog/sanctions-evasion-in-silicon-valley-inside-gva-capitals-216-million-penalty/