UPDATE 1-Kremlin: U.S. transfer of confiscated funds to Ukraine will backfire

Adds Kremlin quotes

May 11 (Reuters) - The Kremlin on Thursday criticised a decision by the United States to transfer to Ukraine the confiscated assets of conservative Russian businessman Konstantin Malofeyev, saying it was illegal and would backfire on Washington.

U.S. Attorney General Merrick Garland on Wednesday authorized millions of dollars worth of Malofeyev's confiscated assets to be sent for use in Ukraine, the first such instance of confiscated Russian money being used in such a way.

Asked about the case, Kremlin spokesman Dmitry Peskov said the United States had "stolen" the money, and such decisions would "hit it like a boomerang".

"This undermines the confidence of investors and owners of assets that are somehow connected with America, and this certainly cannot remain without consequences for the United States," he said.

Peskov said such steps demanded a response but did say what action Russia might take. He said there was possibility of contesting it via a lawsuit in the United States because "we do have the opportunity to defend our rights in court".

The U.S. Justice Department charged Malofeyev last year with violating sanctions imposed on Russia after its invasion of Ukraine, saying he had provided financing for Russians promoting separatism in Crimea.

Attorney General Garland said the case marked the first U.S. transfer of forfeited Russian funds for the rebuilding of Ukraine, but it would be the last.

(Reporting by Reuters, writing by Mark Trevelyan
Editing by Gareth Jones)