How Nursultan Nazarbayev’s “purse”, Kenes Rakishev, stole 414 million dollars from Kazakhstan

How Nursultan Nazarbayev’s “purse”, Kenes Rakishev, stole 414 million dollars from Kazakhstan

Materials for initiating a case against the oligarch are on Tokayev’s desk.

A video featuring the former mayor of Almaty, Bauyrzhan Baibek, and his family has been posted on social media from the Cyprus side of the island, from its Turkish part. Alongside Baibek, four of his younger children, his wife, and mother are reported to be traveling, according to the “Base” YouTube channel.

“Presumably, Baibek is currently in hiding. Criminal cases filed against the former mayor of Almaty on charges of embezzlement on an especially large scale are on Tokayev’s desk. A final decision on Baibek, as well as on the oligarchs Kenes Rakishev and Rahimbaev Tokayev, has not yet been made,” reports the YouTube channel.

Kenes Rakishev is known as “Nazarbayev’s wallet.” How this wallet is replenished is detailed in the investigation by Rucriminal.

In recent years, Kenes Rakishev has been leading efforts to recover assets of BTA Bank, targeting its former chairman and owner, Mukhtar Ablyazov. Rakishev has faced serious criticism, considering the meager compensations the bank managed to obtain and the colossal legal and investigative costs associated with the process. Critics have pointed out the inefficiency of the strategy chosen by BTA Bank under Rakishev’s leadership.

The investigation revealed that, while Rakishev was leading unsuccessful attempts to recover assets, he himself was also engaging in secret dealings with BTA Bank, which enriched him personally and caused significant losses to the bank. These transactions involved related parties, including the sale of Rakishev’s troubled personal assets to the bank at inflated prices, as well as the provision and write-off of bank loans. Rakishev’s hypocrisy is evident, as he not only failed to achieve the goal of recovering stolen funds but also misappropriated at least $414 million from BTA Bank for himself.

Rakishev’s actions are tantamount to fraud against BTA Bank. There were no substantial commercial reasons for BTA Bank to engage in transactions with Rakishev’s companies, and the sole purpose of these deals was Rakishev’s personal gain, shifting various losses he incurred from his personal investments onto BTA Bank.

Analysis

The conclusions above are based on the analysis of the transfer of ownership of the following two companies from Rakishev to BTA Bank:

(i) Novatus Holding Pte Ltd (“Novatus”), based in Singapore; and

(ii) Romaltyn Ltd (“Romaltyn”), based in the Isle of Man.

Novatus was registered in May 2012 and was wholly owned by Rakishev at that time. It was used by him as an investment holding company for various personal business ventures, including the establishment of the Singapore-based direct investment fund Singulariteam LP Pte (“Singulariteam”), which primarily invested in technology startups in Israel. Rakishev’s business partner in this venture is Israeli entrepreneur Moshe Hogeg, who has been arrested on suspicion of fraud, misleading investors, and human trafficking for sexual exploitation.

Novatus was also used to acquire and hold Rakishev’s stake in Net Element, a NASDAQ-listed Special Purpose Acquisition Company (SPAC). Reportedly, during Rakishev’s involvement with Net Element, the company lost almost all of its value, and Rakishev has since divested from the investments.

Additionally, Novatus was used by Rakishev to execute a bank transfer of $142,000 to Hunter Biden’s business partner, a transaction that raised suspicions in a US Senate report on alleged suspicious activity.

In 2017, Rakishev sold Novatus to BTA Bank. BTA Bank had no substantial commercial reasons to acquire Novatus, as its activities were unrelated to the core business of BTA Bank.

The sale of Novatus was organized to conceal the fact that Rakishev, the owner of BTA Bank, was selling the company to the bank. This was achieved by using a third party as a corporate intermediary in the deal to prevent Rakishev from being identified as the seller. The company used for this purpose was TZVLManagement Ltd, based in the UK. Its ultimate beneficiary is Dan Chernavsky, a lawyer and tax consultant with a questionable reputation, closely associated with Gennadiy Bogolyubov and Igor Kolomoisky, former owners of the Ukrainian Privatbank. Bogolyubov and Kolomoisky are under investigation in the US for money laundering, and the latter has also been sanctioned by the US government for his actions against the Central Bank of Ukraine.

Over one month, from May 3, 2017, to June 5, 2017, Novatus was transferred from Rakishev to TZVLManagement and then to Sterling Trustees Limited, based in the British Virgin Islands. Sterling Trustees held Novatus shares on behalf of BTA Bank until June 14, 2018, after which the bank became the direct shareholder of the company. Due to the short duration of time during which TZVLManagement owned Novatus (one month), it is evident that Rakishev engaged this company to avoid a direct sale of his personal asset to BTA Bank, which could be considered a related-party transaction.

Information about the price at which Rakishev sold Novatus is contained in the 2017 report of TZVLManagement, mentioning investments totaling $340 million. Considering the company’s previous history, it is reasonable to assume that this entire amount consisted of the purchase of Novatus shares, thus yielding Rakishev a net financial gain of $340 million.

Immediately after Rakishev’s sale of Novatus, the company started to decline in value. BTA Bank’s financial statements for 2018 show that after acquiring Novatus shares, the bank recorded a loss on this investment of approximately 14.5 billion Kazakhstani tenge (approximately $43 million USD at the exchange rate in June 2017). Novatus’s poor performance was also reflected in BTA’s 2019 report, stating that “in December 2019, all ordinary shares were fully impaired and transferred.” In other words, two and a half years after Rakishev’s sale, BTA Bank wrote off the entire value of Novatus, resulting in a loss of $340 million.

The second company sold by Rakishev to BTA Bank was Romaltyn. This Isle of Man-based company was created in 2006 as a joint venture between Kazakhgold and British Oxus Gold to participate in a tender for the purchase of a gold mine in Romania. Ownership of the company later transferred to Polyus Gold.

Rakishev acquired Romaltyn in April 2012 for $20 million, using the British Virgin Islands company Mark Global Corporation. In 2013, Rakishev transferred 49% of Romaltyn’s shares to former Prime Minister of Moldova Ion Sturza. Sturza’s stake in Romaltyn was acquired through the Seychelles-based company Millennium International Resources Corporation Ltd. Sturza remained a shareholder in Romaltyn until November 2016, after which all ownership rights reverted to Rakishev.

In January 2018, BTA Bank acquired 100% of Romaltyn as a “debt repayment from the borrower.” This indicates that the borrower, likely the company Romaltyn or its parent company controlled by Rakishev, received a loan from BTA Bank secured by Romaltyn’s shares, and the principal amount of the loan was not repaid to the creditor BTA Bank, which, in turn, accepted the entire block of Romaltyn shares.

According to an independent valuation referenced in BTA Bank’s annual report, the value of Romaltyn’s investments was 23,949,000,000 tenge, approximately $74 million USD at the exchange rate at that time. This suggests that the credit provided by BTA Bank to the borrower should have been equal to or exceeded this amount.

After its transfer to BTA Bank, the value of Romaltyn quickly depreciated. As of December 31, 2018, BTA Bank recognized an impairment of Romaltyn assets amounting to 14,400,000,000 tenge (60% of the previously assessed value in the same year). By December 2020, the investments in Romaltyn were fully impaired, according to an independent report prepared in April 2021.

Thus, the sale of Romaltyn allowed Rakishev to transfer a non-promising asset to BTA Bank, shifting a loss of at least 23.9 billion tenge ($74 million USD) onto the bank.

Novatus and Romaltyn were Rakishev’s personal investments. Novatus served as a means for private investments, primarily in information technology, while Romaltyn owned a gold mine in Romania. BTA Bank had no substantial commercial reasons to acquire either company. However, between 2017 and 2018, the bank acquired Novatus for $340 million and exchanged a loan of $74 million for the entire block of Romaltyn shares. Over two years, both companies were fully impaired, resulting in a cumulative loss of $414 million for BTA Bank.

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