Mukhtar Ablyazov’s two-decade journey from jailed Kazakhstan energy minister to accused money launderer at the heart of two New York federal lawsuits had plenty of stops along the way.
Like Russia, where he lived in exile before returning home and regaining control of BTA Bank, Kazakhstan’s third largest. And London, where courts sentenced him to 22 months in prison for contempt and froze more than $5 billion he’s accused of stealing from BTA, whose clients included Morgan Stanley and other US institutions.
Eventually, one of Ablyazov’s partners wound up in Manhattan, where he made a deal with two Donald Trump associates and others to launder up to $440 million of the allegedly stolen cash through U.S. real estate projects, including luxury apartments in Trump SoHo, according to allegations in a federal lawsuit and sworn statements by some of the partners.
Now the battle to get some of that money back to Kazakhstan is playing out in New York, led by
Schwartz, bank investigators, and forensic accountants have spent years hunting down money they say Ablyazov funneled through more than 1,000 holding companies and banks in Dubai, Tanzania, Moscow and beyond. They’ve turned potential defendants into witnesses to build cases, and so far have identified or recovered less than $1 billion in assets, including a 10,000 square-foot mansion outside Washington D.C. that was seized from Ablyazov’s sister, although there is no indication she knew the money she used to buy it was tainted.
“It’s like being a prosecutor again. It’s a slow and painstaking process, and bad guys are moving the money faster than you can trace it,” Schwartz said in an interview. “This is as big, as legitimate fraud as I have seen.”
Thousands of pages of records and affidavits from at least nine court cases also depict a vast conspiracy in which partners allegedly preyed on each other in ways that became fodder for legal discovery. Members diverted millions of dollars to companies they controlled, secretly recorded conversations and offered bribes and kickbacks to skim from their partners, according to allegations in federal and state lawsuits and sworn statements by some of those directly involved. When relationships soured, they filed lawsuits that aired their dealings, providing leads for the bank’s team.
Much of that material has surfaced in the bank’s lawsuit against Felix Sater, a former confidant of
Sater said in an interview that he has done nothing wrong, and in a Sept. 30 filing called Ablyazov the victim of a “fundamentally corrupt” Kazakhstan government that stole his bank and tortured him in prison.
“The strategy of the Plaintiffs has been to reinforce the assumption of criminality on the part of all involved in order to attempt to focus the court’s attention on the last step of their allegations, namely, the receipt of monies by our client, Felix Sater,” Sater’s attorney, John H. Snyder, wrote in a September court filing. “However, the matter is not as black and white as the Plaintiffs continually seek to portray.”
In an interview from Paris, where he lives in exile, Ablyazov told Bloomberg News that the Kazakh government fabricated the bank fraud allegations because he formed an opposition political party. He called those who have testified against him in the US cases, including Sater, who was paid by BTA, “bought witnesses.”
Ablyazov said he has been targeted for physical violence and moves to new apartments monthly. He is continuing to fight extradition to Kazakhstan, although he has faced recent court setbacks. “They are using my bank to fabricate cases against me to prevent me from bringing freedom and democracy to Kazakhstan,” Ablyazov said in a separate response to written questions from Bloomberg.
On the Run
In 2009, bank investigators in Kazakhstan accused Ablyazov, as BTA’s sole owner and director for four years, of issuing billions of dollars in fraudulent loans to offshore companies he secretly controlled. Not long before that, his friend and mayor of Almaty, Viktor Khraprunov, came under scrutiny for allegedly defrauding the government of $300 million by auctioning off state property for a fraction of its worth to companies secretly controlled by his relatives, according to allegations filed in multiple lawsuits.
But the men had a bigger threat to their freedom: The government of then-President Nursultan Nazarbayev, whom Human Rights Watch and others accused of widespread abuse, including torture and massive theft of oil revenues, began targeting Ablyazov and his associates, according to pleadings they filed seeking asylum in several European countries.
As Kazakh authorities closed in, Ablyazov fled to London and Krhaprunov and family members, including his son Iliyas Khrapunov, to Switzerland. Flush with cash and with no place to hide it, Iliyas reached out to his old friend, Sater, according to the bank’s lawsuits against Sater and Triadou SPV, a Luxembourg company Iliyas Khrapunov used to invest in the US.
Sater devised a plan to help Khrapunov buy an Ohio shopping mall, a Syracuse, New York, mental health facility and a medical device startup, all sides agree. Sater in an interview said the businesses were legitimate and funded by what he believed to be Iliyas’ money. The bank alleged that the cash was Ablyazov’s, and that Sater and Iliyas Khrapunov helped launder it.
A longtime adviser to the
There is no indication that other members of the Trump Organization or Donald Trump himself knew anything about Iliyas Khrapunov or his history, the alleged plot to move money or the tainted assets, Schwartz wrote in the complaint.
Real Estate Deals
Central to the scheme’s American angle—and eventually its demise—are two real estate deals involving high-profile Manhattan developers, allegedly with Ablyazov’s money.
The first deal was led by Joseph Chetrit, the other by Sater, a Russian-born, Brooklyn-bred developer whose company, Bayrock, partnered with Trump to build Trump SoHo.
Triadou SPV invested $40 million in Chetrit’s project to convert New York’s Flathotel into luxury condos around 2012, according to multiple lawsuits and sworn statements by a former Triadou director. Less than three years later, Chetrit allegedly bought out Triadou’s stake “in exchange for a fraction of the fair market value … and personal bribery payments to at least one Triadou executive,” US District Judge Alison J. Nathan wrote in a Sept. 26, 2017, ruling summarizing the allegations made in the lawsuit.
But Chetrit never paid Triadou any of the $21 million purchase price, according to lawsuits Triadou filed in 2014 and 2015. That case morphed into years of legal battling as BTA joined the fray, seeking to recoup any money it said was connected to Ablyazov or Khrapunov.
In November, 2015, three weeks after the bribery allegations surfaced in a BTA filing, Chetrit settled with the bank. He agreed to give up Triadou’s stake in the deal and property, which included luxury apartments, for a total value estimated to be at least $30 million.
Chetrit has said in court filings that he did nothing wrong and didn’t steal any money. Instead, he said in the filings, he was holding on to the $21 million he owed until a court determined whom he should pay. He didn’t respond to multiple requests for comment.
In a separate deal, Sater bought an Ohio mall in 2013 for $30 million, with money given to him by Iliyas Khrapunov through two companies he controlled, Triadou and Tri-County Mall Investors. Sater confirmed details of the purchase in an interview with Bloomberg Law.
Within a few months, Sater sold the property at a $15 million profit but kept all of the cash, according to a 2015 lawsuit filed against him by Tri-County Mall. The parties settled within days of the filing, with Sater keeping $20 million and returning the rest, Magistrate Judge Katherine H. Parker wrote in a July 3, 2019 ruling.
Sater confirmed that, but insisted to Bloomberg Law that he was holding on to the money as leverage because Khrapunov owed him from several of their partnerships.
“I made them $15 million in three months, and then they tried to fuck me,” Sater said in the interview, adding that as soon as he felt Khrapunov wouldn’t pay him, “all bets are off.”
Iliyas Khrapunov didn’t respond to questions concerning his relationship with Sater, but issued a statement accusing the Kazakh government of manipulating the legal system.
“Unfortunately, the US justice system is weaponized by Kazakhstan’s dictatorial and bloody regime and used to pursue Kazakhstan opposition,” he wrote.
A Brooklyn Kid
Sater says not long after settling the lawsuit he jumped at a chance to get even with Iliyas Khrapunov.
He agreed with a Hong Kong private detective to help BTA track down some of the allegedly stolen money in exchange for fees that reached $100,000 per month, plus 16% of anything he helped recover, according to the contract and Sater’s own sworn statements during the litigation.
The deal called for Sater to provide “intel on Ablyazov and Khrapunov assets, providing witnesses who can help BTA and the City of Almaty track down those assets and generally try to plan strategy on how to go after those assets,” Sater testified in a 2019 deposition for BTA’s lawsuit against Ablyazov. He set up a company, Litco, to handle the transaction and to keep his cooperation virtually invisible because he feared he could be harmed, he testified in the deposition.
But the deal became public after Sater accused the bank and its investigators of reneging on part of the contract. The agreement, and an ongoing arbitration grievance Sater filed against against the bank, were included in pleadings and responses in the bank’s lawsuit against him.
Sater, in the interview, insisted he wasn’t ratting out a partner; just settling a score with Iliyas Khrapunov.
“I am a Brooklyn kid. I don’t turn on my own. Loyalty is really important,” Sater said. “I would never, ever hurt a partner of mine, or a friend of mine. Don’t try to screw me, and you won’t have to deal with the pain of my response.”
Asked why he provided information on Ablyazov, who he said he met only once briefly at Iliyas Khrapunov’s wedding, Sater paused.
“Money.”
Flip, Or Be Sued
In 2014, the City of Almaty filed its first US lawsuit in California, seeking Beverly Hills houses and other assets it connected to the Khrapunov family. But a federal judge tossed the case, saying the plaintiffs hadn’t shown enough connection between the allegedly stolen cash and California to allow the court to have jurisdiction in the US.
A year later, Boies Schiller Flexner joined the BTA/Almaty cases in the US and began investigating the scheme’s international banking channels and web of alleged accomplices.
A judge two years ago dismissed all counts in the bank’s lawsuit against Ablyazov and the Khrapunovs, in part because they were time-barred. But BTA’s lawsuit against Triadou continued to trial, leading to the December jury award of $109 million, plus interest that doubled the total.
Records from the federal court cases and judicial rulings show the strategy employed by Schwartz, other BTA attorneys in London, and Arcanum, the Hong Kong private investigative firm that hired Sater. Arcanum worked to identify anyone who got the money, then the lawyers gave them a choice: Cooperate and return the money, or risk being sued.
Magistrate Judge Parker noted the strategy in her July 3, 2019 opinion, saying that in some cases the bank’s team “actually threatened or asserted claims against the individuals identified by Arcanum,” as profiting from the stolen money. She added that approach was broad and aimed at people “who were involved in some way, either knowingly or unknowingly.”
Schwartz summed it up this way in a 2019 filing in the lawsuit against Sater, two of his companies and another Sater associate who also worked for Trump on development projects.
“While it has often been said that ‘there is honor among thieves,’ the Defendants in this case make that idiom hard to credit,” he wrote. “This case is about some seriously dishonorable thieves.”
The cases are: City of Almaty, Kazahkstan v. Ablyazov, S.D.N.Y., No. 1:15-cv-05345, 7/9/15; and City of Almaty, Kazakhstan v. Sater, S.D.N.Y, No. 1:19-cv-02645, 3/25/19.
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