Steppe to Soho: How Millions Linked to Kazakhstan Mega-Fraud Case Ended up in Trump Property

For years, jour­nal­ists — and report­ed­ly even fed­er­al inves­ti­ga­tors — have pored over U.S. President Donald Trump’s busi­ness deals for signs that crim­i­nals and their dirty mon­ey may have entered his orbit.

The Trump SoHo tow­er in New York has been one of Trump’s most scru­ti­nized devel­op­ments. Among oth­er con­tro­ver­sies, it has been alleged in court that three con­do­mini­ums in the build­ing were pur­chased using funds linked to a mas­sive fraud case in the for­mer Soviet repub­lic of Kazakhstan.

Now, a new inves­ti­ga­tion by the Organized Crime and Corruption Reporting Project (OCCRP) and the Dutch tele­vi­sion pro­gram Zembla sheds new light on the case.

Using doc­u­ments nev­er before made pub­lic, it reveals exact­ly how the three mil­lion dol­lars used to pur­chase the con­dos found their way to New York. It also appears to sup­port alle­ga­tions raised in court that the mon­ey may be of crim­i­nal origin.

Over US$ 30 mil­lion from the same taint­ed source was used to finance oth­er invest­ments in the United States with the help of Felix Sater, a con­vict­ed finan­cial fraud­ster and one-time Trump advi­sor. Sater’s for­mer com­pa­ny, Bayrock Group, part­nered with Trump to build the trou­bled Trump SoHo.

The doc­u­ments and inter­views pro­vide a detailed account of the money’s wind­ing glob­al trail — via off­shore shell com­pa­nies and a bank linked to ter­ror­ism financ­ing — into the United States.

Its ori­gin can be traced to a sin­gle stash of rough­ly $440 mil­lion con­nect­ed to a noto­ri­ous fraud case involv­ing Kazakhstani bil­lion­aire Mukhtar Ablyazov. Last year, the fugi­tive banker was sen­tenced in absen­tia to 20 years in prison by a Kazakh court on charges that includ­ed embez­zling bil­lions of dol­lars from the country’s BTA Bank, which he for­mer­ly headed.

If the mon­ey is indeed Ablyazov’s, the real estate invest­ments could put those involved, includ­ing Sater, in legal jeopardy.

Although not con­clu­sive, the com­plex off­shore trail used to move the mon­ey shows “clas­sic red flags for mon­ey laun­der­ing,” said Richard K. Gordon, the head of the anti-mon­ey laun­der­ing grad­u­ate pro­gram at Case Western Reserve University Law School in Cleveland, Ohio.

If the ulti­mate source of the mon­ey was crim­i­nal pro­ceeds, then that makes it a mon­ey laun­der­ing case,” Gordon said.

That rais­es a risk, albeit small, of legal trou­ble for Sater and oth­ers linked to the deals, Gordon said. Although the legal bar for pros­e­cu­tion is high, a case could be made against any­one who know­ing­ly con­spired to laun­der the mon­ey, or had it end up in their accounts.

Kazakh oli­garch Mukhtar Ablyazov arrives at a cour­t­house in Lyon in October 2014 before a hear­ing as part of his appeal tri­al regard­ing his extra­di­tion to Russia. Credit: AFP / Philippe Merle

Family Ties

 The lat­est rev­e­la­tions appear to prove accu­sa­tions against Ablyazov and oth­er wealthy Kazakhstanis in two drawn-out civ­il court cas­es in New York and California.

The cas­es — brought by Kazakhstan’s biggest city, Almaty, and BTA Bank — allege that Ablyazov and his rel­a­tive by mar­riage, for­mer Almaty may­or Viktor Khrapunov, made invest­ments in real estate and busi­ness­es in the United States using stolen money.

Khrapunov, whose step­son, Ilyas, is mar­ried to Ablyazov’s daugh­ter, lives in exile. He and his fam­i­ly stand accused of steal­ing approx­i­mate­ly $300 mil­lion through cor­rupt land deals dur­ing his time as mayor.

Ilyas and his sis­ter, Elvira Kudryashova, are also defen­dants in the case.

Lawyers for the accused have denied that the mon­ey came from illic­it sources, argu­ing that the financ­ing for the invest­ments had come from anoth­er rel­a­tive by marriage.

Documents filed in court show that, between 2012 and 2014, Ilyas and Elvira were helped with their U.S. invest­ments by Felix Sater, the for­mer Trump advi­sor, and anoth­er for­mer Trump Organization employ­ee, Daniel Ridloff.

The invest­ments include the $1.2 mil­lion pur­chase of a for­mer facil­i­ty for the men­tal­ly dis­abled in Syracuse, New York, and the pur­chase of shares in a health kiosk company.

The largest invest­ment facil­i­tat­ed by the two men was the 2013 pur­chase, for rough­ly $30 mil­lion, of the debt on the Tri-County mall in the sub­urbs of Cincinnati. They sold their inter­est in the prop­er­ty for $45 mil­lion three months later.

The rela­tion­ship with the Kazakhstanis appears to have been very prof­itable for at least one of the two Americans.

A legal dis­pute saw Sater with­hold the Ohio mall sale mon­ey from the Khrapunovs. The impasse was only resolved after the Khrapunov firm behind the invest­ment agreed to let him walk away with the major­i­ty of the pro­ceeds, accord­ing to a doc­u­ment filed by plain­tiffs in the New York case in December.

Just why Sater man­aged to make tens of mil­lions of dol­lars from the deal is unknown, but the doc­u­ment pro­vides a hint.

According to the doc­u­ment, Sater was grant­ed the set­tle­ment after his lawyer sent a let­ter to a Khrapunov com­pa­ny in October 2013 stat­ing that Ilyas had told him that “that the funds for sev­er­al of [Khrapunov’s] com­pa­nies belonged to Mr. Ablyazov.”

The exis­tence of this let­ter rais­es the pos­si­bil­i­ty that Sater was ful­ly aware he was help­ing invest mon­ey linked to Ablyazov’s ongo­ing crim­i­nal fraud case.

The Khrapunovs also made oth­er invest­ments worth tens of mil­lions of dol­lars with no appar­ent help from Sater and Ridloff. Those deals includ­ed Los Angeles prop­er­ty and two hotel and con­do­mini­um devel­op­ments in New York.

The 46-sto­ry Trump SoHo hotel and con­do­mini­um tow­er was devel­oped in part by Sater’s for­mer com­pa­ny, Bayrock, and opened in 2010.

The tow­er soon proved to be a dis­ap­point­ment, plagued by vacan­cies. Two of Trump’s chil­dren, Donald Jr. and Ivanka, report­ed­ly nar­row­ly avoid­ed pros­e­cu­tionafter alle­ga­tions were raised that they tried to boost con­do­mini­um sales in the build­ing by lying to prospec­tive investors.

The Trump Organization with­drew from the trou­bled project in 2017 fol­low­ing a slew of neg­a­tive pub­lic­i­ty. The devel­op­ment is report­ed to be among the busi­ness deals being looked into by spe­cial coun­sel Robert Mueller.

The firm behind the tow­er also has links to the Khrapunovs, show­ing that Sater has known the fam­i­ly for at least a decade. In 2007, as the Trump SoHo was in devel­op­ment, the fam­i­ly set up a Dutch joint ven­ture with Sater’s Bayrock, called KazBay, aimed at coal min­ing and pow­er gen­er­a­tion in Kazakhstan. Bayrock and the Khrapunovs also part­nered on a con­do­mini­um project in Switzerland the fol­low­ing year.

The Dominick, the Manhattan high-rise known as the Trump SoHo until 2017. Credit: Zembla

Elvis Has Bought the Building

Documents pre­sent­ed in court show that much of the mon­ey for the U.S. invest­ments came from off­shore, large­ly from accounts at FBME Bank, a now-defunct Tanzania-based finan­cial insti­tu­tion with offices in Russia and Cyprus. The bank was sanc­tioned by the U.S. gov­ern­ment in ear­ly 2016 after it was found to be involved in mon­ey laun­der­ing, ter­ror­ism financ­ing, and arms proliferation.

But the exact mon­ey trail, and how it con­nects with Ablyazov’s world, has so far been hid­den from pub­lic view. The inves­ti­ga­tion by OCCRP and part­ners, how­ev­er, shows for the first time that the mon­ey can be traced back to hun­dreds of mil­lions con­nect­ed to Ablyazov’s fraud case.

The rev­e­la­tions come from a set of doc­u­ments first unearthed in the United Kingdom, which has been the cen­ter of the pro­tract­ed glob­al wran­gle over the Kazakhstani mogul’s assets.

In 2016, a lawyer for BTA Bank — the Kazakhstani bank defraud­ed by Ablyazov — dis­closed to a U.K. court that a pri­vate inves­ti­ga­tor had approached the bank with what he said was evi­dence that a Dubai-based off­shore finan­cial plan­ner named Eesh Aggarwal had been build­ing and run­ning a net­work of off­shore com­pa­nies that were laun­der­ing the stolen money.

According to the lawyer, the pri­vate inves­ti­ga­tor pre­sent­ed doc­u­ments tak­en by what he claimed were “Israeli com­put­er hack­ers” from Aggarwal’s com­put­er. They revealed, he said, that Aggarwal had worked for Ablyazov’s son-in-law, Ilyas, in build­ing and run­ning a net­work of off­shore com­pa­nies that fun­neled hun­dreds of mil­lions of dol­lars between FBME accounts.

(The pri­vate inves­ti­ga­tor, Stuart Page, did not respond to emails from a reporter seek­ing an interview.)

BTA’s own pri­vate inves­ti­ga­tors began fol­low­ing Aggarwal. In mid-June 2016, notic­ing that he had flown into the United Kingdom, lawyers for the bank sought — and received — an order from a British court to require him to turn over his files.

OCCRP and part­ners were grant­ed access to the files in late 2017 by a source with direct knowl­edge of the case. They include cor­re­spon­dence, orga­ni­za­tion­al charts, and loan and debt agreements.

The doc­u­ments show that Ilyas Khrapunov — under the code­name “Elvis” — was the ulti­mate ben­e­fi­cia­ry of a com­plex web of almost a dozen off­shore com­pa­nies and trusts admin­is­tered by Aggarwal that han­dled close to $440 mil­lion through FBME accounts.

By ana­lyz­ing doc­u­ments filed in the New York and California cas­es, reporters were able to piece togeth­er a trail that shows this mon­ey was used in part to finance key Khrapunov invest­ments in the United States — includ­ing the Trump SoHo apart­ments and the Ohio mall invest­ment assist­ed by Sater and Ridloff.

Several of the emails show that Sater was involved in coor­di­nat­ing trans­fers of mil­lions of dol­lars to the United States. They also show his rela­tion­ship with two mem­bers of the Khrapunov fam­i­ly. In one email dis­cussing a $3 mil­lion trans­ac­tion, Viktor Khrapunov’s step­daugh­ter Elvira Kudryashova — the pur­chas­er of the three Trump SoHo apart­ments — refers to Sater as “my busi­ness asso­ciate.” Other emails show Ilyas in cor­re­spon­dence with Sater.

Aggarwal hung up when con­tact­ed by a reporter. He did not reply to a fol­low-up email.

Sater did not respond to writ­ten ques­tions sent by reporters. Ridloff declined to com­ment via a lawyer.

Belgian Bucks

Reporters were able to use the doc­u­ments to trace the mon­ey back to its orig­i­nal source: A Belgian busi­ness­man who claims to have been repay­ing an almost half-bil­lion dol­lar debt to Ablyazov at a time when the fugi­tive banker was under a freeze order and was fran­ti­cal­ly hid­ing his assets from the British courts.

That busi­ness­man was Frank Monstrey, an entre­pre­neur who in 2004 bought Zhaikmunai, a Kazakh oil and gas com­pa­ny that has since gone pub­lic in the United Kingdom under the name Nostrum Oil & Gas.

The seized doc­u­ments show that the entire $440 mil­lion that financed Ilyas’ off­shore net­work came from two com­pa­nies based in British off­shore havens that belonged to Monstrey, who has since found him­self pulled into Ablyazov’s British case.

The doc­u­ments show that the com­pa­nies, called Sartfield and Claremont, paid the mon­ey over a peri­od of near­ly a year in 2011 and 2012 into Northern Seas Waterage, a Seychelles-reg­is­tered firm under Ilyas’ ulti­mate con­trol. Aggarwal, his finan­cial advi­sor, then fil­tered the mon­ey through the net­work, some of it even­tu­al­ly into the United States.

Lawyers for BTA man­aged to con­vince a British court ear­ly last year to freezeMonstrey’s company’s shares in Nostrum Oil & Gas. Just a month after the freeze was grant­ed, Monstrey resigned as Nostrum’s chair­man. By the mid­dle of the year, he had reached an out-of-court set­tle­ment with BTA to sell his shares in the com­pa­ny to the bank.

I have nev­er been a proxy for or agent of Ablyazov or those I now know to have been asso­ci­at­ed with him,” Monstrey said. “I have unwit­ting­ly and inno­cent­ly found myself sucked in to a bat­tle between BTA and Ablyazov/Khrapunov.”

Monstrey declined to com­ment in response to detailed fol­low-up ques­tions sent by reporters.

Nostrum declined a request by reporters for comment.

A spokesper­son for Ablyazov, Peter Sahlas, declined to answer ques­tions sent by reporters about the trans­ac­tions and key play­ers such as Monstrey, Sater and the Khrapunovs.

Sahlas wrote that Ablyazov was being per­se­cut­ed for his oppo­si­tion to Kazakhstan’s regime, and that his 2017 fraud con­vic­tion in the coun­try could not “be con­sid­ered to have the least amount of cred­i­bil­i­ty giv­en the com­plete lack of a legit­i­mate legal sys­tem in this Central Asian dic­ta­tor­ship.”

The civ­il cas­es in the U.K. and U.S. over Ablyazov’s assets were sim­i­lar­ly “ground­ed on ques­tion­able or out-of-con­text evi­dence from a cor­rupt coun­try with no rule of law,” Sahlas wrote.

Ilyas Khrapunov did not respond to ques­tions sent by reporters to a spokesman.

BTA did not respond to detailed ques­tions sent by email.

Catch Me If You Can”

Revelations on the mon­ey trail raise the ques­tion of whether those involved in bring­ing the funds to the United States vio­lat­ed anti-mon­ey laun­der­ing laws.

Although Sater knew the Khrapunov fam­i­ly for half a decade before help­ing in these deals, any mon­ey laun­der­ing inves­ti­ga­tion would have to find evi­dence he know­ing­ly took part in a con­spir­a­cy to laun­der mon­ey with a crim­i­nal ori­gin, Case Western Reserve’s Gordon said.

Meanwhile, the messy soap opera con­tin­ues to wend its way through courts in both the United Kingdom and the United States.

The U.K. Supreme Court ruled in March that Ilyas Khrapunov can be pur­sued in that country’s courts for alleged­ly con­spir­ing with Ablyazov in his attempts to con­ceal his assets.

In New York, too, the younger Khrapunov has run into trou­ble. In March, a fed­er­al judge in the dis­trict court hear­ing the case sanc­tioned Khrapunov for leak­ing a tran­script of a depo­si­tion giv­en by BTA’s cur­rent chief.

The judge in the case, Katharine H. Parker, was uncon­vinced by Khrapunov’s denials.

The judge wrote: “His tone and deliv­ery con­veyed his ‘catch me if you can’ atti­tude and, in this Court’s view, demon­strat­ed his lack of credibility.”

Who’s Who?

Mukhtar Ablyazov

The for­mer chief of Kazakhstan’s BTA Bank. He fled the coun­try in 2009 amid a cri­sis that led to the bank’s nation­al­iza­tion, and has been accused by the bank of embez­zling more than $6 bil­lion. Ablyazov claims he is being per­se­cut­ed for his oppo­si­tion to the country’s rul­ing regime. He was con­vict­ed in absen­tia for the fraud in Kazakhstan in 2017. He has had more than $4.6 bil­lion worth of judge­ments made against him in court in the United Kingdom, and was con­vict­ed of con­tempt there in 2012. Ablyazov was arrest­ed by French police in 2013 but released three years lat­er after a court agreed he was being sought for polit­i­cal reasons.

Viktor Khrapunov

The for­mer may­or of Kazakhstan’s largest city, Almaty. Along with his wife, Leila, Khrapunov is accused of embez­zling over $300 mil­lion in his time in office. Khrapunov’s step­son, Ilyas, is mar­ried to Ablyazov’s daugh­ter, Madina Ablyazova.

Khrapunov lives in Switzerland.

Felix Sater

A Russian emi­gre who grew up in New York, Sater was impris­oned over a 1993 bar fight and con­vict­ed a few years lat­er for a mafia-linked stock fraud. He avoid­ed prison in the lat­ter case by agree­ing to become an infor­mant for the FBI.

Sater was a co-founder of Bayrock Group, one of the devel­op­ers behind the Trump SoHo tow­er. Trump has sought to dis­tance him­self from his for­mer busi­ness part­ner, who pre­vi­ous­ly car­ried busi­ness cards iden­ti­fy­ing him­self as a “senior advis­er” to the now-US pres­i­dent. Sater was report­ed­ly involved in unsuc­cess­ful plans to build a Trump-brand­ed tow­er in Moscow, as well as a 2017 back-chan­nel scheme with Trump’s per­son­al lawyer, Michael Cohen, to bro­ker a Ukraine peace deal.

Ilyas Khrapunov and Elvira Kudryashova

Ilyas is mar­ried to Mukhtar Ablyazov’s daugh­ter, Madina, and over­saw many of the family’s U.S. invest­ments. Under the code­name “Elvis,” he was the ben­e­fi­cia­ry of an off­shore net­work of com­pa­nies that han­dled the $440 mil­lion linked to Ablyazov that was used in part for these projects.

Khrapunov’s step­daugh­ter, Elvira, was the ben­e­fi­cial own­er of the three apart­ments in the Trump SoHo devel­op­ments. She was also the ben­e­fi­cia­ry of a health kiosk firm, World Health Networks, set up in the United States.

Frank Monstrey

A Belgian busi­ness­man with long­stand­ing ties to Kazakhstan. Monstrey invest­ed in the Kazakhstani oil com­pa­ny Zhaikmunai LP in 2004 and until 2017 served as its head. The com­pa­ny was lat­er renamed Nostrum Oil & Gas.

Two firms owned by Monstrey were the source of the $440 mil­lion used to finance much of the U.S. invest­ments. Monstrey denies he was a straw man hid­ing Ablyazov’s assets, and says the mon­ey was to repay a debt he had unwit­ting­ly come to owe Ablyazov.

Additional report­ing by Chris Benevento, Lejla Sarcevic, Bermet Talant and Katarina Sabados.

Additional report­ing was also pro­vid­ed by Kevin G. Hall and Ben Wieder of McClatchy.

Steppe to Soho: How Millions Linked to Kazakhstan Mega-Fraud Case Ended up in Trump Property

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