A U.S. federal court has upheld sanctions against Liechtenstein-based gold trader Rheingold Edelmetall and the Diegelmann family, rejecting claims that the measures were arbitrary and unfounded.

Last week, Chief Judge James E. Boasberg of the U.S. District Court for the District of Columbia upheld the sanctions imposed by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) on Liechtenstein-based gold trader Rheingold Edelmetall, its founder Axel Diegelmann and members of the Diegelmann family.

The ruling, issued on November 25, 2024, affirms OFAC's decision to designate the plaintiffs under Executive Order 14024 for allegedly operating in the metals and mining sector of the Russian Federation.

Arbitrary and Capricious?

The Diegelmann family and their associated entities were added to OFAC’s Specially Designated Nationals (SDN) list in February 2024. OFAC accused them of collaborating with Russian metals companies to disguise the origin of precious metals, facilitating transactions to launder funds for Russian clients, and obfuscating ownership structures to circumvent international sanctions.

The plaintiffs contested these designations, arguing that OFAC’s actions were arbitrary, capricious, and unsupported by substantial evidence under the Administrative Procedure Act (APA).

Government Motion Granted in Full

After a review of the administrative record, including classified materials, Judge Boasberg ruled in favor of OFAC, granting the government’s motion for summary judgment and dismissing the plaintiffs’ claims.

The court concluded that OFAC acted within its authority under Executive Order 14024 and related regulations. The order allows sanctions against individuals and entities deemed to operate or have operated in specified sectors of the Russian economy, including metals and mining.

Every Gold Purchase is Sanctionable

The judge addresses Plaintiff's argument that «under Defendants’ definition, any person or entity that had ever purchased any geological material, precious metal or otherwise, from Russia would be subject to sanctions, even if such purchase occurred prior to the Russian invasion of Ukraine.» According to his judgment, the «broad language in OFAC’s determination,» leads  
«to the conclusion that a wide range of conduct is sanctionable.»

Rejecting the plaintiffs’ narrower, industry-specific interpretation, the court upheld OFAC’s broader understanding of «procuring» as obtaining something, including through buying and selling. This interpretation encompasses the Diegelmanns’ alleged activities.

Unclassified Evidence «Not Overwhelming»

While acknowledging that the unclassified evidence against the plaintiffs was «not overwhelming,» the court found it sufficient when considered alongside classified materials reviewed in camera. The evidence included allegations of collaboration with Russian entities and transactions aimed at evading sanctions.

The decision underscores the challenges of contesting U.S. sanctions in court. While the plaintiffs may still pursue administrative reconsideration to seek removal from the SDN list, the ruling validates OFAC’s process and its reliance on both classified and unclassified information in making designations.

Rare Challenge

This case has drawn significant attention as a rare legal challenge to U.S. sanctions by European individuals. It highlights the expansive reach of American sanctions policy. The ruling reinforces OFAC’s authority to act against global actors facilitating Russian economic interests, even outside U.S. borders.

For the Diegelmann family, the legal battle may not be over, but Judge Boasberg’s decision represents a setback.