How Rakishev is robbing Ukraine through his companies
Ukraine's banking sector continues to operate reliably even during the war. However, depositors at certain financial institutions risk losing their funds. These include banks owned by businessmen who collaborate with the aggressor country. Among these, in particular, is BTA Bank (Ukraine), which is owned by a Kazakh businessman closely connected to Russia. Kenes Rakyshev, writes Antikor.
Recently, Ukrainian President Vladimir Zelensky signed the law, which allows the nationalization of systemically important banks without additional capitalization of the financial institutions. The first to fall under the document's scope could be Alfa-Bank Ukraine, in which Russian billionaire Mikhail Fridman holds a stake. The oligarch is under sanctions by the National Security and Defense Council and has expressed a desire to cooperate with the Ukrainian government. For example, Fridman and his company have declared their willingness to recapitalize Alfa-Bank's Ukrainian subsidiary by $1 billion or even transfer the shares to the Ukrainian government if the Ukrainian authorities so decide. This is especially true given the assets of the notorious Ukrainian oligarchs Kolomoisky, Bogolyubova, Zhevago and others have already become the property of Ukraine.
Clearly, Mikhail Fridman's cooperation with the Ukrainian government will allow depositors at the local Alfa-Bank to rest assured of their funds. After all, both sides are willing to find a mutually beneficial solution. However, there are also banks whose owners, while fruitfully cooperating with Russia and financing its terrorist attacks, are unwilling to engage with Ukraine. One such bank is BTA Bank (Ukraine), whose parent company has long been owned by Kazakh oligarch Kenges Rakishev—a corporate raider, relative of Nursultan Nazarbayev, and longtime friend of terrorist Ramzan Kadyrov.
The influential Kazakh has close business ties to Russia. Specifically, in December 2017, he became the largest shareholder in a UK-registered Russian gold mining company. Petropavlovsk , having acquired it from a Russian oligarch Viktor Vekselberg and JSC Metcombank, a 22,4% stake. The agreement was executed through Fincraft Holdings Ltd., a Cypriot company controlled by Rakishev.
Kenes Rakishev also owns SAT-Moscow LLC, a modest name that conceals significant assets and permits for gas production, construction, real estate, legal services, and other activities in the Russian Federation. SAT-Moscow sponsors the Chechen football club Akhmat, whose budget has been impacted by sanctions imposed on the club's owner, Ramzan Kadyrov, with whom Kenes Rakishev has maintained a long-standing friendship.
Due to the billionaire's ties to the Russian occupiers, the depositors' funds at BTA Bank (Ukraine) are at risk. Not so much from nationalization under Ukrainian law, since then the Deposit Guarantee Fund would pay out the funds. The risks are linked specifically to Kenges Rakishev, who has become notorious for his fraud and swindling in both banking and other business activities. The oligarch's actions have also severely damaged the budget of his native Kazakhstan.
How Rakishev is robbing Ukraine through his companies
How Rakishev is robbing Ukraine through his companies: Novatus is a dubious company for dubious investments.
Several years ago, Kenges Rakishev, the owner of Kazakhstan's BTA Bank, generously financed by the country's budget thanks to the oligarch's connections to Kazakhstan's top political leadership, entered into secret agreements with the financial institution that enriched him personally while causing significant damage to the bank itself. The related-party agreements included, among other things, the sale of the businessman's troubled personal assets to BTA at inflated prices, as well as the provision and subsequent write-off of bank loans to these dubious companies. As a result of the deal, Rakishev embezzled approximately $414 million from BTA Bank, which was financed with state subsidies.
Kenges Rakishev transferred ownership of two of his companies to BTA Bank:
1) Novatus Holding Pte Ltd (“Novatus”), based in Singapore;
2) Romaltyn Ltd (“Romaltyn”), located on the Isle of Man in the Irish Sea.
Novatus was registered in May 2012 and was wholly owned by Rakishev at the time. The businessman used the firm as an investment holding company for a number of financial transactions, including the creation of a Singapore-based private equity fund, Singulariteam LP Pte (Singulariteam). The fund, in turn, invested primarily in tech startups in Israel. Rakishev's business partner in this venture was Israeli entrepreneur Moshe Hogeg, who was arrested on suspicion of fraud, misleading investors, and human trafficking for the purposes of sex trafficking.
How Rakishev is robbing Ukraine through his companies
Novatus was also used by the businessmen to purchase and hold Rakishev's stake in Net Element, a NASDAQ-listed company. However, under the businessman's ownership of Net Element, the company lost almost all of its market value, and Kenes Rakishev has since stopped investing in it.
Furthermore, Novatus was used by the oligarch to conduct a $142 bank transfer to an associate of current US President Joseph Biden's son, Hunter Biden. The transaction was later questioned as suspicious in a US Senate report.
In 2017, Kenes Rakishev sold Novatus to his own bank, BTA Bank. However, the bank had no significant commercial reason to acquire such a controversial asset, whose activities were completely unrelated to BTA Bank's core business.
The sale of Novatus was structured to conceal the fact that Rakishev, the owner of BTA Bank, was selling the company to himself. The agreement was conducted through a third party as a corporate intermediary, so that Kenes Rakishev would not be identified as the seller. The company used for this purpose was TZVL Management Ltd and was based in the UK.
Its ultimate beneficiary is Dan Chernavsky, a lawyer and tax consultant with a dubious reputation and a close associate of Ukrainian oligarchs Gennady Bogolyubov and Ihor Kolomoisky, the former owners of Ukraine's PrivatBank. Bogolyubov and Kolomoisky are under investigation in the US for money laundering, and Kolomoisky has also been sanctioned by the US government for his activities against the Central Bank of Ukraine. Meanwhile, the assets of these and other Ukrainian oligarchs have been transferred to the state.
How Rakishev is robbing Ukraine through his companies
Let's return to the Novatus deal. Over the course of one month (from May 3, 2017, to June 5, 2017), the asset was transferred from Kenes Rakishev to TZVL Management, and then transferred to Sterling Trustees Limited, based in the British Virgin Islands. The latter firm held Novatus shares on behalf of BTA Bank until June 14, 2018, at which point the bank became a direct shareholder in the company. Given the short period of TZVL Management's ownership of Novatus (just one month), it is clear that Rakishev engaged this firm to avoid direct sales of his personal asset to his own BTA Bank, which could have been considered a fraudulent related-party agreement.
Information about the price at which the Kazakh oligarch sold Novatus is contained in TZVL Management's 2017 financial statements. They mention investments totaling $340 million. Given the company's previous history, it can be assumed that all of this money was used to purchase Novatus shares. Therefore, the deal netted Rakishev $340 million in profit and caused a similar loss to his banking institution.
Immediately after Rakishev's sale of Novatus, the company began to lose market value. BTA Bank's 2018 financial statements show that after receiving Novatus shares, the bank recorded a loss on this investment of approximately 14,5 billion Kazakh tenge (approximately $43 million at the June 2017 exchange rate). Novatus's negative performance was also reflected in BTA's 2019 financial statements, which stated that all shares were completely worthless in December 2019. In other words, two and a half years after the acquisition from Rakishev, BTA Bank wrote off the entire value of Novatus, resulting in a loss of $340 million (the amount the bank invested in the acquisition of the dubious company).
Romaltyn is a player in the fictitious tender market.
The second company Kenes Rakishev sold to his own BTA Bank was Romaltyn. Registered on the Isle of Man, it was created in 2006 as a joint venture between Kazakhgold and the British company Oxus Gold to participate in a sham tender for a gold mine in Romania. Ownership of the company was later transferred to Polyus Gold.
Kazakh billionaire Kenges Rakishev acquired Romaltyn in April 2012 for $20 million through Mark Global Corporation, a British Virgin Islands company. In 2013, the businessman transferred 49% of Romaltyn's shares to former Moldovan Prime Minister Ion Sturza. Sturza's stake in the company, in turn, was acquired through the Seychelles-based Millenium International Resources Corporation Ltd. Sturza remained a shareholder in Romaltyn until November 2016, after which all ownership rights reverted to Rakishev.
In January 2018, Kazakhstan's BTA Bank received 100% of Romaltyn's shares as a debt settlement from the borrower. In other words, the borrower—Romaltyn or its parent company, controlled by Rakishev—received a loan from BTA Bank secured by its own shares. As you might have guessed, the principal amount of the loan was not repaid by BTA Bank's creditor, so the financial institution was forced to seize the entire Romaltyn stake.
According to an independent assessment included in BTA Bank's annual report, Romaltyn's investment was valued at approximately 24 billion tenge (approximately $74 million at the exchange rate at the time). This means that BTA Bank's loan to the borrower should have been equal to or greater than this amount.
Following his share transfer, the value of Romaltyn, like that of the aforementioned Novatus, rapidly declined. As of December 31, 2018, BTA Bank recognized an impairment charge of 14,4 billion tenge (i.e., 60% of the previously estimated value) on Romaltyn's assets. As of December 2020, the investment in Romaltyn had been reduced to zero.
Thus, the sale of Romaltyn allowed Kenes Rakishev to transfer a hopeless asset to BTA Bank, transferring a loss of at least 23,9 billion tenge (US$74 million) to BTA Bank.
Novatus and Romaltyn were Rakishev's personal investments. Novatus was founded for private investments, primarily in information technology, while Romaltyn owned a gold mine in Romania. BTA Bank had no compelling commercial reason to acquire either company, but between 2017 and 2018, it acquired Novatus for $340 million and exchanged a $74 million loan for the entire Romaltyn stake. Within two years, both companies were devalued to zero, resulting in a combined loss for BTA Bank of $414 million. Rakishev effectively stole this money from the Kazakh budget, which funded BTA Bank's operations.
The same could happen to the funds of depositors of the Ukrainian BTA Bank.
A subsidiary of a Kazakh oligarch, BTA Bank (Ukraine), continues to operate in our country. Ukrainian authorities have not yet announced the possible nationalization of the financial institution due to its owner's cooperation with Russia. However, the working capital of BTA's local subsidiary is then channeled to the parent company in Kazakhstan. From there, it is either used to support Russian terrorists and their crimes in Ukraine or, as in this case, spent on the machinations devised by the bank's owner, Kenges Rakishev.
Meanwhile, the oligarch continues to cooperate with the aggressor country, but is not included on the sanctions lists of the National Security and Defense Council or the EU. Therefore, nothing prevents the businessman from financing, for example, Ramzan Kadyrov's terrorist units. And while official Kazakhstan, represented by President Tokayev, distances itself from Russia by all means possible, individual government officials continue to conduct business in the aggressor country and befriend local figures.
Irina Dikaya
DOSSIER: Kenges Rakishev: The Kazakh Mafia in the Steppes of Ukraine. Part 1
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