IPI Partners, LLC OFAC Settlement: $11.5M (2025)

IPI established the IPI Data Center Partners Fund I, L.P. (the "IPI Fund") on July 13, 2016, to buy, build, and operate data centers rented to tenant companies for data storage. Beginning on or around January 5, 2017, a senior member of IPI's investment committee (the "IPI Senior Member") was introduced to a former senior investment banker (the "Banker") identified as a representative of Suleiman Kerimov, a wealthy Russian investor. On or around August 11, 2017, the Banker introduced the IPI Senior Member to Nariman Gadzhiev ("Gadzhiev"), identified as Kerimov's nephew and representative in investment-related matters. Three days later, the IPI Senior Member met with Gadzhiev in person in San Francisco, receiving background on Kerimov and his family and proposing investment opportunities, including one in the IPI Fund.

On or around September 28, 2017, Definition Services, Inc. ("Definition"), a British Virgin Islands-based entity ultimately owned by Heritage Trust, a Delaware-based Kerimov family trust, signed a subscription agreement committing to invest $25 million in the IPI Fund. Approximately one month later, Gadzhiev and the Banker arranged for the IPI Senior Member to meet with Kerimov in person at Kerimov's estate in Nice, France. On March 29, 2018, Definition signed a second subscription agreement committing to invest another $25 million, bringing the total commitment to $50 million.

OFAC designated Kerimov on April 6, 2018 pursuant to Executive Order 13661 for being an official of the Government of the Russian Federation. Shortly after, IPI consulted with outside counsel, which concluded that IPI was under no obligation to block Definition's account because Kerimov did not formally own 50% or more of Definition. However, IPI had not informed outside counsel that the Banker had been described as Kerimov's "gatekeeper," that the IPI Senior Member knew both the Banker and Gadzhiev to be Kerimov's representatives in investment matters, or that the IPI Senior Member had secured each of Definition's investment commitments by meeting in person either with Gadzhiev or with Kerimov himself. IPI had reason to know that Definition's attestation of sanctions compliance was inaccurate but continued to deal directly with Gadzhiev and his employees in managing Definition's investment in the IPI Fund.

From April 19, 2018 onwards, IPI issued capital calls including to Definition on 18 occasions, distributed profits to Definition on 20 occasions, and collected management fees including from Definition on 13 occasions. Between approximately July 2018 and June 2022, these transactions constituted 51 apparent violations of § 589.201 of the Ukraine-/Russia-Related Sanctions Regulations, 31 C.F.R. part 589.

OFAC determined that IPI did not voluntarily self-disclose the apparent violations and that the apparent violations constitute a non-egregious case. Accordingly, under OFAC's Economic Sanctions Enforcement Guidelines ("Enforcement Guidelines"), 31 C.F.R. Part 501, app. A, the base civil monetary penalty applicable in this matter equals the applicable schedule amount, which is $14,356,690. The settlement amount of $11,485,352 reflects OFAC's consideration of the General Factors under the Enforcement Guidelines.

Investment firms and all U.S. capital market participants, whether in private equity or otherwise, should have a clear understanding of their sanctions risks and compliance obligations, and implement effective, risk-based controls to prevent violations.

These controls should reflect that OFAC authorities incorporate broad definitions of "interest" and "property interest" that look beyond legal formalities to underlying practical and economic realities. In some cases, an analysis of equity ownership in accordance with OFAC's 50 Percent Rule may be sufficient to address OFAC sanctions risk. In other cases, especially situations involving opaque legal structures or the use of proxies that may obscure a party's interest in an entity or property, a more exhaustive analysis may be appropriate. Longstanding OFAC guidance urges caution when considering dealing with an entity in which a blocked person may be involved. Such dealings, particularly those involving the use of proxies or legal structures that may conceal a blocked person's interest, could result in indirect dealings with a blocked person or in blocked property. Individuals and companies with reason to know of such circumstances cannot later claim ignorance even if a blocked person has no nominal ownership or overt role.

This enforcement action also demonstrates the importance of ensuring legal and compliance advice is based upon a full and complete understanding of all relevant facts and circumstances. While receiving advice from outside experts can help entities fulfill their sanctions compliance obligations, it does not absolve them from liability if they violate U.S. sanctions. For any advice to be effective, it must be based upon a complete picture of all material information available from across an organization.

This page summarizes an OFAC enforcement case based on the document archived below. SanctionsLookup assumes no liability for errors, omissions, or inaccuracies in the original documents, this summary, or any changes made to the source documents at any time.

Provided for informational purposes only and does not constitute legal or compliance advice. Always consult the source document directly rather than relying on this summary.