Based on the Gracetown, Inc. enforcement action (released December 4, 2025), here is the reformatted and simplified summary.
What Happened
Gracetown, Inc., a property management company based in New York, has been fined approximately $7.1 million for severely violating US sanctions against Russia. (Note: this is not a negotiated settlement, but a financial penalty imposed on Gracetown)
Between 2018 and 2020, Gracetown managed luxury real estate properties in New York and Washington, D.C. for Oleg Deripaska, a high-profile Russian oligarch. The company continued this work even after the US government designated Deripaska as a sanctioned person (an “SDN”) in 2018. Most notably, Gracetown ignored a specific written warning from OFAC telling them to stop. Instead of freezing the assets, they continued to collect payments and manage the properties, helping the oligarch maintain his lifestyle and assets in the US.
The Penalty
The Settlement Amount: $7,139,305
How it was calculated:
In most sanctions cases, the final penalty is significantly lower than the legal maximum. However, in this case, OFAC determined that the penalty should be near the statutory maximum.
OFAC decided that Gracetown’s actions were “egregious” (a remarkably bad and willful violation of the law). Because of this, and because Gracetown did not confess to the government before getting caught, they faced the severe “statutory maximum” penalty rather than a negotiated lower amount.
To arrive at the final figure, OFAC analyzed the “General Factors.” Because the violations were deemed “egregious” and were not voluntarily disclosed, the standard reductions that many companies receive were not applied.
Aggravating and Mitigating Factors
Aggravating Factors (What made the penalty higher)
- Behavior: Gracetown received a direct “Notification of Blocked Property” from OFAC explicitly warning them that Deripaska was sanctioned and that they must stop dealing with him. They ignored this notice and continued their business relationship.
- General Factor: Willful or Reckless Violation of Law
- Applicability: Deliberately ignoring a specific government warning constitutes a “willful” violation, which is the most serious level of culpability and leads to the harshest penalties.
- Behavior: The company’s management had full actual knowledge that they were managing properties for Deripaska and that he was a sanctioned individual.
- General Factor: Management Involvement
- Applicability: Violations are treated more severely when senior management is aware of the illegal conduct and approves or directs it.
- Behavior: Gracetown failed to report that they were holding “blocked property” (the real estate) to OFAC for over 45 months, despite legal requirements to do so within 10 days.
- General Factor: Cooperation with OFAC (Lack thereof)
- Applicability: Concealing information or failing to file mandatory reports is viewed as a failure to cooperate and an attempt to hide violations.
- Behavior: The company provided economic benefits to a high-priority target of US foreign policy (a Russian oligarch linked to the Kremlin), undermining the impact of the sanctions.
- General Factor: Harm to Sanctions Program Objectives
- Applicability: Providing significant assets or services to key sanctioned individuals is considered to cause substantial harm to US national security interests.
Mitigating Factors (What lowered the penalty)
- Behavior: Gracetown had not received a penalty notice or finding of violation from OFAC in the five years preceding the date of the transactions.
- General Factor: Sanctions History
- Applicability: OFAC considers a company’s clean record over the previous five years as a standard mitigating factor in calculating civil penalties.
- Behavior: Gracetown cooperated with OFAC’s investigation by entering into agreements to extend the statute of limitations (tolling agreements) and responding to requests for information.
- General Factor: Cooperation with OFAC
- Applicability: Demonstrating a willingness to work with the government during the investigation—even if the violation itself was not self-disclosed—is typically a factor that weighs in favor of the subject.
Despite the existence of these two mitigating factors, they had a limited impact on the final penalty amount. Because OFAC determined that Gracetown’s conduct was egregious—specifically noting the willful decision to ignore a direct government warning (“Notification of Blocked Property”)—the agency focused primarily on the statutory maximum penalty. In cases of egregious and willful violations, standard mitigating factors like a clean history or administrative cooperation are often insufficient to significantly reduce the fine, resulting in a penalty that remains near the legal limit.
What are the Takeaways?
Never Ignore a Government Warning
If OFAC sends your company a letter, notice, or subpoena regarding a specific client or risk, you must act immediately. Ignoring a direct warning is the surest way to face maximum penalties and potential criminal liability.
Property Management is “Dealing in Blocked Property”
Managing real estate for a sanctioned person—collecting rent, paying utilities, or performing repairs—is illegal. You are effectively providing a service that helps a sanctioned person maintain their asset.
You Must Report “Frozen” Assets
If you discover you are holding property (like a house, apartment, or bank account) for a sanctioned person, you cannot just “do nothing.” You must officially report that property to OFAC as “blocked” within 10 days. Failing to report is a separate, serious violation.
Gatekeepers are Targets
OFAC and the DOJ are aggressively targeting “gatekeepers”—lawyers, property managers, and accountants—who help oligarchs hide their wealth. You cannot claim you are “just a service provider” if you know the ultimate owner is sanctioned.
Other Resources
For more information on the specific sanctions programs and guidelines mentioned:
- OFAC Sanctions Lists: The official list of blocked persons (SDN List), which includes Oleg Deripaska.
- Ukraine-/Russia-related Sanctions Regulations: The specific laws Gracetown violated, which prohibit any dealings with designated Russian oligarchs.
- Economic Sanctions Enforcement Guidelines: The rulebook OFAC uses to determine if a case is “egregious” and to calculate the maximum penalty.