U.S. Government Implements First Economic Sanctions Targeting Foreign Trade-Secret Theft Under PAIPA

For years, companies confronting trade-secret theft have primarily relied on civil litigation, criminal prosecutions, and cybersecurity defenses. However, these traditional tools often fall short when perpetrators or beneficiaries operate overseas, beyond the jurisdiction of U.S. courts.

This dynamic shifted on February 24, 2026, when the Trump administration announced the first-ever sanctions imposed under the Protecting American Intellectual Property Act of 2022 (PAIPA). This coordinated action by the Departments of the Treasury, Justice, and State represents a significant evolution in the U.S. government’s approach to intellectual property theft.

PAIPA empowers the U.S. government to impose sanctions on foreign individuals or entities that knowingly engage in or benefit from significant theft of trade secrets belonging to U.S. persons, particularly when such theft threatens national security, foreign policy, economic health, or financial stability.

Treasury Secretary Scott Bessent emphasized that these sanctions broaden the government’s toolkit to combat international IP theft. The designations reflect a policy shift: the U.S. increasingly views the theft of strategically important intellectual property as a matter of national security and economic competitiveness, not merely a private commercial dispute.

The inaugural PAIPA sanctions targeted a network allegedly involved in cyber-enabled trade-secret theft and exploit brokerage. The State Department designated Sergey Sergeyevich Zelenyuk, the alleged owner and director of Operation Zero, and Special Technology Services LLC FZ, a United Arab Emirates-based company purportedly used to facilitate sanctions evasion.

According to U.S. authorities, this network purchased zero-day cyber exploits from Peter Williams, an Australian national and former general manager at a U.S. defense contractor. These exploits were intended solely for sale to the U.S. government and allied nations.

Simultaneously, the Treasury Department’s Office of Foreign Assets Control (OFAC) imposed sanctions under Executive Order 13694, which authorizes sanctions for significant malicious cyber-enabled activities, including theft or use of misappropriated trade secrets for commercial advantage. OFAC designated additional individuals and entities linked to Operation Zero, including Zelenyuk’s assistant, a person suspected of connections to the Trickbot cybercrime group, and another exploit brokerage firm tied to the network.

These OFAC designations block all property and interests in property of the sanctioned parties within U.S. jurisdiction and generally prohibit U.S. persons from engaging in transactions with them.

The sanctions were accompanied by a parallel criminal prosecution. On the same day the sanctions were announced, the U.S. District Court for the District of Columbia sentenced Peter Williams to 87 months’ imprisonment for selling his employer’s trade secrets to Operation Zero.

The Department of Justice underscored that the case highlights risks posed not only by external cyber intrusions but also by insiders with privileged access to sensitive technical information. DOJ stressed that individuals who misuse such access to harm U.S. national security face serious criminal consequences.

Historically, trade-secret theft has been addressed primarily through civil litigation under statutes like the Defend Trade Secrets Act or criminal prosecution under the Economic Espionage Act. While these remain important, they often provide limited recourse when the ultimate beneficiary of stolen IP is overseas or beyond U.S. jurisdiction.

Sanctions authorities, by contrast, enable the U.S. government to directly target foreign beneficiaries of stolen trade secrets, including entities that knowingly receive or exploit misappropriated intellectual property. This new enforcement tool fills a longstanding gap in addressing international trade-secret theft.

For multinational companies, this development presents both opportunities and risks. Victims of foreign IP theft may now have a new avenue for government action, while global businesses must remain vigilant about potential sanctions exposure related to improperly obtained technology, data, or proprietary information.

Understanding the scope and implications of PAIPA sanctions is essential for companies operating internationally. Proactive measures, including robust compliance programs and monitoring of supply chains and partners, can help mitigate risks associated with foreign intellectual property theft.

The February 2026 PAIPA sanctions thus mark a pivotal moment in U.S. IP enforcement policy, signaling a more aggressive and coordinated government stance against international trade-secret theft that threatens national interests.