A Russian-language website for investigative journalists and whistleblowers has published a detailed story about how the Kazakh oligarch Kenes Rakishev defrauded BTA Bank. An English translation is below. The original can be found at www.rucriminal.info
In recent years Kenes Rakishev has led BTA Bank’s asset recovery effort against its former Chairman and owner Mukhtar Ablyazov. The meagre recoveries made by the bank, coupled with exceedingly high legal and investigative costs have earned Rakishev considerable criticism, with critics pointing to a lack of efficacy in the strategy adopted by BTA Bank under Rakishev’s leadership.
An open-source investigation has now revealed that while overseeing the failed recovery efforts, Rakishev has himself carried out secretive deals with BTA Bank which have enriched him personally while at the same time causing substantial losses to the bank. Ironically, these deals carry the hallmarks of Ablyazov’s fraudulent modus operandi, notably related-party transactions – including the sale of distressed personal assets at inflated prices and the provision and write-off of bank loans, exposing the hypocrisy of Rakishev who not only has fallen well short of his declared mission to recover stolen monies, but has himself embezzled at least $414 million from BTA Bank.
Rakishev’s actions amount to fraud against BTA Bank. There was no valid commercial reason for BTA Bank to engage in the deals with Rakishev’s companies, and the only purpose of these deals was to personally benefit Rakishev and transfer any losses he incurred from his personal investments onto BTA Bank.
Analysis
The above conclusions are based on the analysis of the transfer of the following two companies from Rakishev to BTA Bank:
- Novatus Holding Pte Ltd (“Novatus”), based in Singapore; and
- Romaltyn Ltd (“Romaltyn”), based in the Isle of Man.
Novatus was incorporated in May 2012 and at the time was fully owned by Rakishev. It was used by him as an investment holding company for a number of personal business ventures, including the establishment of a private equity fund based in Singapore, Singulariteam LP Pte (“Singulariteam”), which has invested mainly in technology start-ups in Israel. Rakishev’s business partner in this venture is the Israeli entrepreneur Moshe Hogeg, who has been arrested on suspicion of fraud, misleading investors and sex trafficking.
Novatus was also used to acquire and hold a stake for Rakishev in NASDAQ-listed Net Element, a Special Purpose Acquisition Corporation (SPAC). During Rakishev’s involvement with Net Element, the company reportedly lost almost all of its value and Rakishev has since exited the investment.
Additionally, Novatus was used by Rakishev to execute a bank transfer of $142k to an associate of Hunter Biden, a transaction that was questioned in a US Senate report into alleged suspicious activities.
In the course of 2017 Rakishev sold Novatus to BTA Bank. There was no valid commercial reason for BTA Bank to acquire Novatus, whose activities have nothing to do with BTA Bank’s core business.
The sale of Novatus was organised in a way to hide the fact that it was Rakishev, the owner of BTA Bank, who was selling the company to the bank. This was done by using a third party as a corporate intermediary to the transaction, so that Rakishev would not appear as the seller. The company that was used for this purpose was called TZVLManagement Ltd and was based in the UK. Its ultimate beneficiary is Dan Chernavski, a lawyer and tax consultant with a chequered reputation who is a close associate of Gennadi Bogolyubov and Ihor Kolomoisky, former owners of Ukraine-based Privatbank. Bogolyubov and Kolomoisky are both under investigation in the United States for money laundering and the latter has also been sanctioned by the US government for his activities against the central bank of Ukraine.
During a one-month period between 3 May 2017 and 5 June 2017, Novatus was transferred from Rakishev to TZVLManagement and was later moved to BVI-based Sterling Trustees Limited. Sterling Trustees held Novatus shares on behalf of BTA Bank until 14 June 2018, at which point the bank became a direct shareholder in the company. Because of the duration of time during which TZVLManagement held the ownership of Novatus (one month) it is obvious that Rakishev sought the involvement of this company to avoid a direct sale of his personal asset to BTA Bank, which would have been seen as related party transaction.
An indication of the price at which Rakishev sold Novatus can be found in the 2017 accounts of TZVLManagement, which refer to investments booked at a cost of $340 million. Given the prior history of the company, it is reasonable to assume that the entirety of this amount consisted of the purchase of Novatus shares, which will therefore have netted Rakishev a financial gain of $340 million.
Immediately after Novatus was sold by Rakishev, the company started losing value. The 2018 BTA Bank accounts show that upon receipt of the Novatus shares BTA Bank booked a loss on this investment of circa 14.5 billion Kazakh tenge (approximately $43 million as per the June 2017 exchange rate). The poor performance of Novatus was further reflected in the 2019 BTA accounts, which state that “in December 2019 all common shares were completely devalued and transferred”. In other words, two and a half years after purchasing Novatus from Rakishev, BTA Bank wrote off Novatus’ entire value resulting in a loss of $340 million.
A second company sold by Rakishev to BTA Bank was Romaltyn. This is a company based in the Isle of Man, which was established in 2006 as a joint venture between Kazakhgold and British Oxus Gold to bid for the purchase of a gold mine in Romania. Ownership of the company was later transferred to Polyus Gold.
Rakishev acquired Romaltyn in April 2012 for $20 million, using a British Virgin Islands vehicle called Mark Global Corporation. In 2013, Rakishev ceded a 49% stake in Romaltyn to Ion Sturza, the former Prime Minister of Moldova. The latter’s interest in Romaltyn was acquired through a Seychelles-based vehicle called Millenium International Resources Corporation Ltd. Sturza remained as a shareholder in Romaltyn until November 2016, at which point the entire ownership of the company returned to Rakishev.
In January 2018 BTA Bank received 100% of Romaltyn as a “debt repayment from the borrower”. This is evidence that the borrower, most likely Romaltyn or its parent company controlled by Rakishev, received a loan from BTA Bank secured by Romaltyn shares and that the principal of the loan was not paid back by the lender to BTA Bank, which in exchange accepted the entire shareholding of Romaltyn.
According to an independent valuation appraisal referenced in the BTA Bank annual accounts, the value of the Romaltyn investment was KZT 23,949,000,000, circa $74 million based on the exchange rate at the time. This suggests that the loan granted by BTA Bank to the borrower must have been equal to or greater than this amount.
Following its transfer to BTA Bank, Romaltyn’s value depreciated rapidly. As at 31 December 2018 BTA Bank recognised an impairment in relation to the Romaltyn assets of KZT 14,400,000,000 (ie 60% of the value appraised earlier that year). As at December 2020, the investment in Romaltyn was impaired to nil in accordance with an independent report carried out in April 2021.
In summary, the Romaltyn sale allowed Rakishev to offload to BTA Bank an underperforming asset in which he had invested, passing on a loss of at least KZT 23.9 billion ($74 million) onto BTA Bank.
Conclusions
Novatus and Romaltyn were personal investments made by Rakishev. Novatus was a vehicle for private equity ventures, mainly in information technology, while Romaltyn owned a gold mine in Romania. There was no valid commercial reason for BTA Bank to acquire either company yet between 2017 and 2018 the bank purchased Novatus for $340 million and exchanged a $74 million loan for the entire shareholding of Romaltyn. Within two years, both companies were devalued to zero, resulting in a cumulative loss to BTA Bank of $414 million.
Source: oligarchs.eu