A scandal involving fraud, racketeering and theft that features ties to President Donald Trump and a notorious Cyprus bank is playing out in a Los Angeles federal court, where a former Kazakhstan politician and his family are accused of laundering at least US$300 million in stolen government funds.
The suit was filed last August in the US Central District Court against Viktor Khrapunov, the former mayor of Kazakhstan’s capital city, Almaty, and 15 other defendants for allegedly engaging in a spectacular series of fraudulent sales of government properties to enrich themselves, then transmitting the money first to Switzerland and, when it was in danger of being sequestered, of moving it into the United States to purchase exclusive properties in Beverly Hills and other posh California locations.
The Khrapunov family’s flight from justice has been the source of a long list of news stories in the Russian press, the Financial Times, McClatchy News Service and other news organizations. Some 24 criminal cases are pending in Kazakhstan against the clan for embezzlement, fraud, money laundering, establishing and directing an organized criminal group for criminal purposes, abuse of power, and bribery.
Outlaw bank FBME
Millions of the stolen money were funneled through the Cyprus unit of FBME, which was shut down by US authorities in 2017 on allegations it was one of the world’s most notorious repositories of laundered funds by crooks, African satraps, Russian mobsters, pornographers, nerve gas producers, scamsters and Indonesian bankers. FBME was the subject of a series of Asia Sentinel stories last year.
Yet another case has been filed in the US Southern District of New York by lawyers representing Almaty and the Kazakhstani BTA Bank, alleging that Viktor Khrapunov and Mukhtar Ablyazov, ex-chairman of the board of BTA Bank, stole as much as US$6 billion, investing some of it in New York real estate through a company called Triadou SPV. Triadou has denied the charges.
It’s alleged that Ablyazov would issue enormous loans to valueless entities that he ultimately owned, which would then be obscured by transfers among different shell corporations and never repaid. BTA bank obtained a worldwide freezing order and a US$4 billion judgment in the United Kingdom against Ablyazov in 2012. The Khrapunovs are believed to have comingled certain of their assets with Ablyazov’s, which were then hidden in sham investments and entities through which he would move hundreds of millions of dollars for both families.
We didn’t do it
Attorneys for the Khrapunovs and Ablyazov have repeatedly said they are guiltless and charged that they are the targets of political persecution by Kazakhstan President Nursultan Nazerbayev, who himself is listed among the world’s foremost kleptocrats and is believed to be hiding billions of looted funds overseas.
Khrapunov was mayor of Almaty from 1997 to 2004, when he became governor of a northeastern Kazakhstan province and was subsequently appointed Minister of Emergency Measures. In late 2007, Khrapunov quit all positions, ostensibly for health reasons.
In August of 2008, apparently just ahead of questioning authorities, Khrapunov and his family loaded up a chartered Tupolev-154 jetliner with what allegedly included 18 metric tonnes of antiques, jewelry, works of art and other cargo and headed for Switzerland, where he is currently retired and is the subject of an Interpol Red Notice for his arrest.
Among other activities, according to the 53-page document filed by the law firm of Latham and Watkins as plaintiffs for the city of Almaty in an attempt to reclaim the stolen millions, Khrapunov used shell companies to purchase three apartments in the Trump Soho tower costing a total of US$3.1 million.
Ties to Trump
Khrapunov was one of the subjects of a 2017 Dutch documentary called "The Dubious Friends of Donald Trump," which convincingly ties Trump, through his partner Bayrock Group LLC, to Khrapunov’s wife. It also explores Trump’s ties to a convicted mobster named Felix Sater, who headed Bayrock. Another probe by the McClatchy newspapers reported that Bayrock partnered with the Trump Organization on at least three projects, including construction of the famed Trump Soho tower in the mid-2000s and was in business with the Khrapunov family. Bayrock, McClatchy reported, “is believed to be under the microscope of Justice Department and congressional investigators looking at Russian meddling in the 2016 election.”
The story got its start as a true family enterprise in the chaos of the collapse of the Soviet Union and Kazakhstan declared its independence, with few checks and balances on rapacious officials.
“Viktor and his co-conspirators exploited Viktor’s position of trust and authority to steal hundreds of millions of dollars from the people of Almaty and laundered, hid, and spent this money,” the suit alleges, using fake privatizations. State assets such as nursery schools, homes for the elderly, orchards and even some parts of natural reserves on the outskirts of Almaty were appropriated by the firms controlled by the Khrapunovs. Other property allegedly was taken through leaks of tender information.
Family that Steals together Stays Together
Khrapunov, his wife, their children and the children’s spouses “systematically stole money from Almaty through Viktor’s corrupt use of his political power and a series of fraudulent real estate transactions that allowed the Khrapunovs to convert public assets to their personal use.”
In 2007, however, the authorities were onto them. Fearing discovery, the family headed for Switzerland, where their children, Iliyas and Elvira had already taken up residency. But three years later in 2012, the Swiss began freezing their assets.
Fearing the Swiss would seize their fortune, they allegedly “engaged in racketeering activity to launder and hide the stolen money in and through the United States using various sham companies and disguised entities” out of a belief that because the US didn’t have an extradition or legal mutual assistance treaty, they were beyond the reach of the Kazakhs.
Accordingly they set up a flock of nominee companies including Maro Design LLC, Haute Hue LLC, 628 Holdings LLC. RPM USA LLC, RPM-Maro LLC, World Health Networks, Candian, Crownway and Vilder, chartered variously in the US, the British Virgin Islands and Panama.
Millions of dollars are alleged to have been funneled by the family to the Vilder and Crownway through FBME, which was closed down in March 2017 by the U.S. Treasury’s Financial Crimes Enforcement Network as a large-scale money-laundering vehicle. FBME was blocked from doing business in the United States or using US currency. Tanzania’s central bank has also revoked FBME Bank’s business license.
The Kazakhstan funds, however, have continued to be shifted among a bewildering series of banks, companies and other concerns in several countries, making the money almost impossible to trace, according to the suit
Several million ended up in purchases of homes hidden on some of southern California’s leafiest streets in Beverly Hills, Studio City, Irvine, Newport Beach and other California locations, as well as the three Trump Soho condominiums. Many of the properties have been resold, according to the suit, making it even more difficult to figure out what Almaty’s money went.
The plaintiffs, according to the suit, are seeking compensatory and punitive damages, prejudgment interest, fees and costs and further relief as well as a list of other remedies.