Was Trump SoHo Used to Hide Part of a Kazakh Bank’s Missing Billions?

Court cas­es play­ing out on two con­ti­nents may reveal whether the bank’s for­mer chair­man fun­neled mon­ey into three con­dos in the Manhattan lux­u­ry tower.

For eight years, Kazakhstan’s BTA Bank against for­mer Chairman Mukhtar Ablyazov. It’s a clash that has fea­tured death threats, a hack of Kazakh gov­ern­ment com­put­ers and at least $4 bil­lion in miss­ing bank assets. Now, court cas­es play­ing out on both sides of the Atlantic could pull back the cur­tain on whether some of those funds wound up in prop­er­ties devel­oped by for­mer asso­ciates of Donald J. Trump
BTA Bank, once the Central Asian nation’s biggest lender, has accused Ablyazov of embez­zling bil­lions of dol­lars’ worth of mines, hotels, shop­ping cen­ters and oth­er assets in the for­mer Soviet bloc between 2005 and 2009. Even as the lender sought to recov­er those hold­ings, Ablyazov and mem­bers of his fam­i­ly were fun­nel­ing hun­dreds of mil­lions of dol­lars into prop­er­ties in Europe and the U.S., includ­ing three con­do­mini­ums in a 46-sto­ry lux­u­ry devel­op­ment in low­er Manhattan known as Trump SoHo, court doc­u­ments allege.

Ablyazov enlist­ed his son-in-law, Iliyas Khrapunov, to help him con­ceal his assets, accord­ing to sworn state­ments from for­mer asso­ciates of the fugi­tive financier. The pre­vi­ous­ly report­ed pur­chas­es in Trump SoHo, devel­oped by Bayrock Group LLC in part­ner­ship with the Trump Organization, were made by mem­bers of Khrapunov’s fam­i­ly, the bank has alleged in court doc­u­ments. Khrapunov also worked on a sep­a­rate deal with Felix Sater, a for­mer Bayrock exec­u­tive and one­time advis­er to Trump.

And, in a new wrin­kle, emails reviewed by Bloomberg News show that BTA Bank’s cur­rent chair­man, Kenges Rakishev, the man who’s now pur­su­ing Ablyazov, con­sid­ered buy­ing a stake in Trump SoHo in 2012.

The Trump SoHo in low­er Manhattan, on April 4, 2016.

Sitting in a stu­dio apart­ment in Paris a few blocks from the Louvre on a balmy October after­noon, look­ing relaxed in a blue blaz­er with brass but­tons, a white shirt and jeans, Ablyazov, 54, said he didn’t steal any­thing from BTA Bank. He also said he knows noth­ing about links to Trump or his for­mer part­ners. “First of all, I can account for my where­abouts dur­ing this time,” he said with a laugh. “I was in jail.”

But the pur­port­ed Trump link may fig­ure in lit­i­ga­tion under­way in London and New York. In its quest to recov­er assets, BTA Bank has sued Ablyazov and Khrapunov fam­i­ly mem­bers in both cities. As the cas­es unfold, the bank’s lawyers plan to show how they used a con­stel­la­tion of shell com­pa­nies to hide and laun­der assets. One in par­tic­u­lar has come into focus: Swiss Development Group SA, a Geneva-based firm alleged­ly used to vio­late British court orders freez­ing those assets. In three days of hear­ings in London in November, lawyers for Khrapunov and BTA Bank sparred over the cred­i­bil­i­ty of a key wit­ness, a Ukrainian woman who once worked with Ablyazov but, the bank says, has revealed secrets of Ablyazov’s alleged laundering.

The cas­es could shed light on how cash flowed between Kazakhstan and the U.S. in the past decade, a time when Trump and his part­ners were solic­it­ing invest­ments in the East. It’s a peri­od that Robert Mueller, the spe­cial coun­sel inves­ti­gat­ing whether the Trump cam­paign col­lud­ed with Russia to inter­fere in the 2016 U.S. elec­tion, is look­ing at as he exam­ines evi­dence of pos­si­ble mon­ey laun­der­ing and oth­er finan­cial malfea­sance by some for­mer asso­ciates of the president.

Kazakh investors were drawn to the allure of the Trump brand and a coun­try with the rule of law, accord­ing to Kate Mallinson, a part­ner at Prism Political Risk Management Ltd. in London and an expert on Kazakhstan. “The Kazakhs learned from Russia that a Trump prop­er­ty was a safe place to park your mon­ey for a while,” she said, point­ing out that cap­i­tal flight from the coun­try, fueled by polit­i­cal uncer­tain­ty, prob­a­bly reached a peak in 2012.

The Trump Organization hasn’t been accused of any wrong­do­ing in con­nec­tion with the BTA Bank lit­i­ga­tion. The company’s chief legal offi­cer, Alan Garten, said it “had noth­ing to do with the sale of units in Trump SoHo,” which were han­dled by Bayrock, and had nev­er done any busi­ness in Kazakhstan or had any deal­ings with Ablyazov or Khrapunov. On Nov. 22, the Trump Organization said it sold its man­age­ment and licens­ing agree­ment and the president’s name would be removed from the building.

Sater and his lawyer didn’t respond to emails seek­ing com­ment. Khrapunov, 33, declined in an October inter­view in Geneva to com­ment on his rela­tion­ship with Sater or Bayrock. He said he man­aged his own family’s invest­ments legal­ly and denied that SDG was a front for his father-in-law or that he had laun­dered any ill-got­ten gains.

The only rea­son they’re going after me is that I inter­vened to help get Mukhtar out of prison and his wife and daugh­ter out of Kazakhstan,” Khrapunov said. “That was the turn­ing point after which they unleashed hell on me.”

Ablyazov also reject­ed the bank’s claim that he dep­u­tized Khrapunov to hide his assets. “Iliyas has noth­ing to do with my prop­er­ty,” he said.

Interpol

A boy­ish-faced man with a pas­sion for chess and a knack for elud­ing adver­saries, Ablyazov is at the cen­ter of an asset hunt that has stretched from Almaty to Moscow to London and New York. When he was in a French prison from 2013 to 2016 fight­ing extra­di­tion to Russia on fraud charges, he fash­ioned a chess set out of paper and played games against him­self. As the months ticked by, he wrote a trea­tise on the Old Indian Defense, a chess gam­bit designed to lull an oppo­nent into over­con­fi­dence and make him vul­ner­a­ble to counterattacks.

It appears to have worked as well for him in the legal world as on the chess­board. Ablyazov was charged with finan­cial crimes in Russia and Ukraine. He was con­vict­ed in absen­tia of embez­zle­ment in Kazakhstan and sen­tenced to 20 years in prison. British courts ruled he mis­ap­pro­pri­at­ed more than $4 bil­lion from BTA Bank, and a U.K. judge found him in con­tempt for vio­lat­ing a freeze on his assets. In 2015, Manuel Valls, then France’s prime min­is­ter, signed an order extra­dit­ing Ablyazov to Russia, where charges are still pending.

And yet, after all that, the bank has recov­ered less than $500 mil­lion. A French admin­is­tra­tive court can­celed the extra­di­tion decree last December, find­ing that Russia sought him for “a polit­i­cal pur­pose,” leav­ing Ablyazov a free man in Paris.

Ablyazov, who held a major­i­ty stake in BTA Bank, said in the inter­view that he legal­ly owned the prop­er­ties and stakes in com­pa­nies he acquired dur­ing his spell as chair­man. He said he earned $200 mil­lion in 2007 from his invest­ments and that his net worth in 2009 was $6 bil­lion. While he held his assets in shell com­pa­nies in Cyprus and oth­er off­shore havens, he said he wasn’t fleec­ing the bank — he was try­ing to keep them out of the hands of Nursultan Nazarbayev, Kazakhstan’s pres­i­dent since 1991.

Nazarbayev has long hat­ed him, Ablyazov said, because he has sup­port­ed oppo­si­tion groups and media out­lets. A the­o­ret­i­cal physi­cist and for­mer min­is­ter of ener­gy, Ablyazov did time in Nazarbayev’s jails as a polit­i­cal pris­on­er in the ear­ly 2000s. After tak­ing con­trol of BTA Bank in 2005, he said he spurned demands from Nazarbayev to give him a stake in the lender as an act of trib­ute. Certain the gov­ern­ment was going to nation­al­ize the bank, Ablyazov fled for the U.K. in January 2009. But he didn’t go quietly.

When the plane passed over Russian ter­ri­to­ry and entered European air­space, I tele­phoned Nazarbayev’s assis­tant,” Ablyazov recalled. “I told him, ‘There’s no way you can stop the plane now. I know Nazarbayev intends to seize the bank. If the pres­i­dent over­steps this line, I am warn­ing you that I will spend my last cent to take this regime down.’”

Ablyazov arrives under police pro­tec­tion at a cour­t­house in Lyon, France, for a hear­ing in his appeal tri­al regard­ing his extra­di­tion to Russia, on Oct. 17, 2014.

It was a dec­la­ra­tion of war, and that’s what Ablyazov got. Over the next few years, the bank filed 11 civ­il actions in the U.K. against Ablyazov and his asso­ciates. It hired inves­tiga­tive firms led by for­mer mem­bers of the British Special Forces and the CIA to track his move­ments and those of his fam­i­ly members.

Scotland Yard warned Ablyazov in 2011 that it had infor­ma­tion indi­cat­ing his life was in dan­ger, though police offi­cers couldn’t iden­ti­fy the plot­ters. The next year, he slipped out of the U.K. and went under­ground. While in hid­ing in May 2013, the Kazakh gov­ern­ment forcibly returned his wife and daugh­ter to Almaty from Rome in an appar­ent attempt to pres­sure him to turn him­self in. After an uproar over what United Nations human rights offi­cials called an “extra­or­di­nary ren­di­tion,” Kazakhstan per­mit­ted them to return to Italy sev­en months later.

The charges laid against me are false, arti­fi­cial and wrong,” Ablyazov said in Paris. “This is not a com­mer­cial dis­pute but a polit­i­cal persecution.”

Nonsense, said Rakishev, the cur­rent BTA Bank chair­man. Sipping cof­fee at a con­fer­ence table in his sev­enth-floor office at the lender’s head­quar­ters in Almaty, the 38-year-old financier said the case isn’t about pol­i­tics — it’s about mon­ey. There’s ample evi­dence Ablyazov used the lender like his per­son­al pig­gy bank, Rakishev said.

That’s also the government’s view. “Ablyazov through his crimes did sig­nif­i­cant dam­age to BTA Bank and its depos­i­tors, as well as to the state,” Kazakhstan’s Ministry of Justice said in an email. It denied accu­sa­tions that Nazarbayev is hound­ing Ablyazov for his politics.

While at BTA Bank, Ablyazov sold bil­lions of dol­lars of bonds and bor­rowed from banks includ­ing Credit Suisse Group AG and JPMorgan Chase & Co. Then he turned around and used a unit inside the bank called UKB6 to lend mon­ey to invest­ment projects through­out the for­mer Soviet bloc, accord­ing to judg­ments entered by U.K. courts.

The bor­row­ers were shell com­pa­nies con­trolled by Ablyazov, the judges con­clud­ed. They said he siphoned so much cap­i­tal out of BTA Bank that by the time the glob­al finan­cial cri­sis struck in 2008, the lender was crip­pled. The gov­ern­ment nation­al­ized BTA Bank in February 2009, and a few months lat­er it default­ed on more than $12 bil­lion of debt. Since then, the bank has been try­ing to recov­er what­ev­er it can.

Rakishev, who has inter­ests in min­ing, ener­gy and bank­ing in Kazakhstan, said the biggest chal­lenge for him is Ablyazov’s alle­ga­tion of polit­i­cal per­se­cu­tion. “But my task is recov­er­ing assets,” he said. “There is a busi­ness part of this issue that is clear and under­stand­able. If Ablyazov is sure that he earned the mon­ey cor­rect­ly, then he should come to court and prove it.”

Both sides will get the chance to prove their cas­es in the civ­il pro­ceed­ings in London. In three days of hear­ings last month, Khrapunov’s lawyers asked the court to throw out a 2015 order that froze his assets, a deci­sion that would be a blow to the bank’s efforts to recov­er its mon­ey. The attor­neys argued that the bank is try­ing to con­nect him with real estate assets in Russia that it already recov­ered from Ablyazov.

At the cen­ter of the case is Ukrainian lawyer Olena Tyschenko, who was detained in Moscow in 2013 on sus­pi­cion of laun­der­ing mon­ey for Ablyazov. She agreed to coop­er­ate with BTA Bank in exchange for the bank not press­ing Russian author­i­ties to pros­e­cute her. Tyschenko said Khrapunov was help­ing his father-in-law and had been tapped to “take over all of his busi­ness,” accord­ing to a sworn affi­davit from Chris Hardman, a lawyer at Hogan Lovells rep­re­sent­ing the bank.

Khrapunov’s lawyer Charles Samek urged the court not to rely on Tyschenko’s state­ments. “The evi­dence is false,” Samek said. “It’s clear that the bank was inti­mate­ly involved in her arrest and deten­tion and in the crim­i­nal pro­ceed­ings against her.”

Another BTA Bank lawyer, Stephen Smith, said the bank had coop­er­at­ed with Russian pros­e­cu­tors but hadn’t insti­gat­ed the inves­ti­ga­tion. “The bank doesn’t have the pow­er to put peo­ple in a Russian jail,” Smith argued.

Judge Andrew Smith is expect­ed to rule on the mat­ter by ear­ly next year, and a tri­al in the case is sched­uled for 2019.

Ablyazov and Khrapunov may have more ammu­ni­tion. In 2014, hack­ers pen­e­trat­ed the data­bas­es of Kazakhstan’s Ministry of Justice and cap­tured 69 giga­bytes of emails and doc­u­ments, includ­ing con­fi­den­tial com­mu­ni­ca­tions between BTA Bank’s lawyers and gov­ern­ment offi­cials on how to fight Ablyazov.

The British courts have admit­ted the mate­r­i­al in the so-called Kazaword hack in the pend­ing lit­i­ga­tion. Khrapunov and Ablyazov plan to use the doc­u­ments to show the bank’s asset-recov­ery case is a smoke­screen for Nazarbayev’s polit­i­cal­ly moti­vat­ed pur­suit of them, a strat­e­gy that paid off in France.

Rakishev coun­ters that Khrapunov is behind the hack. A Kazakh news site financed by Ablyazov in the past pub­lished many of the doc­u­ments. “Who is the biggest bene­fac­tor of pub­li­ca­tion?” Rakishev said. “Iliyas and Mukhtar.”

Khrapunov said he had noth­ing to do with the attack. But, he said, “it is a relief that the truth is final­ly out about the extent of Kazakhstan’s cor­rup­tion and per­se­cu­tion of my family.”

Educated at Le Rosey, a Swiss board­ing school that attracts Russian elites unfazed by the six-fig­ure annu­al tuition, Khrapunov hikes in the Alps and lives in a vil­lage on the shores of Lake Geneva. With an Interpol-dis­trib­uted arrest war­rant from Kazakhstan hang­ing over him, Khrapunov, a Swiss cit­i­zen, hasn’t crossed the bor­der in four years. Lunching on grilled fish and toma­to juice at a side­walk cafe in Geneva, he came across as an easy­go­ing man on hol­i­day, not the adju­tant of a shad­owy off­shore finan­cial empire.

Yet start­ing in 2011, Khrapunov turned SDG into a machine for laun­der­ing his father-in-law’s wealth, accord­ing to a sworn state­ment filed in court by Nicolas Bourg, a Belgian busi­ness­man who had worked at SDG. In that 2016 dec­la­ra­tion, Bourg stat­ed that Khrapunov direct­ed him to set up a real estate fund as an SDG sub­sidiary. He said he cre­at­ed a series of invest­ment enti­ties in Luxembourg that all answered to Khrapunov, and ulti­mate­ly to Ablyazov.

Khrapunov, who denied the alle­ga­tions, also helped laun­der about $300 mil­lion for his father, Viktor Khrapunov, who’s accused of embez­zling the mon­ey from Almaty when he was its may­or from 1997 to 2004, accord­ing to a law­suit the city and BTA Bank filed in fed­er­al court in New York in 2015. Both Khrapunovs, who have been indict­ed for fraud and oth­er charges by Kazakh pros­e­cu­tors, say the alle­ga­tions are polit­i­cal­ly motivated.

Iliyas Khrapunov first crossed paths with Sater around 2008. Sater and Bayrock founder Tevfik Arif had been hop­scotch­ing from Moscow to the Cote d’Azur hit­ting up oli­garchs for invest­ments in Trump-brand­ed projects since 2004, accord­ing to a per­son who worked at Bayrock at the time.

With his Brooklyn accent and out­er-bor­ough savvy, Sater had a gift for schmooz­ing investors, the per­son said. He clicked with Trump, and the two met often at Trump Tower to talk busi­ness. Bayrock and the Trump Organization had projects per­co­lat­ing in New York, South Florida, Phoenix and Denver, and were even eye­ing one in Moscow. In 2008, SDG and Bayrock joined forces to turn the Hotel du Parc on Lake Geneva into 24 “ultra-lux­u­ry” res­i­dences, accord­ing to court doc­u­ments in the U.S. and a Bayrock presentation.

Khrapunov fam­i­ly mem­bers pur­chased three con­do­mini­ums in Trump SoHo in 2013 for a total of $3.2 mil­lion, accord­ing to law­suits filed by BTA Bank in fed­er­al courts in New York and California. All three units were sold by 2015, two of them at a loss, pub­lic records show.

Khrapunov did a sep­a­rate deal with Sater, a Russian-born deal­mak­er who served time in prison for stab­bing a man in the face with a mar­gari­ta glass in a bar fight and lat­er plead­ed guilty to tak­ing part in stock swin­dles with Russian orga­nized-crime fig­ures. To stay out of prison, he worked as an infor­mant to U.S. pros­e­cu­tors inves­ti­gat­ing the mob’s role on Wall Street.

By 2013, an SDG sub­sidiary called Triadou had invest­ed more than $114 mil­lion in four projects in the U.S., accord­ing to a com­pa­ny finan­cial report, none of them con­nect­ed to Trump. That April, Triadou used a shell com­pa­ny to pur­chase a fore­closed shop­ping cen­ter out­side Cincinnati for $30 mil­lion, court doc­u­ments show. The mon­ey came from an enti­ty called Telford that was con­trolled by Ablyazov, Bourg said. Sater helped man­age the deal. Sater has since worked as a con­sul­tant help­ing BTA Bank’s asset-recov­ery pro­gram, accord­ing to a per­son famil­iar with the arrangement.

In 2012, before the Khrapunovs bought the three Trump SoHo con­dos, Rakishev was approached about pur­chas­ing a stake in the build­ing and per­haps even the whole tow­er. Ever since Trump had unveiled plans for the tow­er in 2006, the devel­op­ers had strug­gled to sell its 380-plus units. On Feb. 27, 2012, Rakishev received an email from Keith Rubenstein, founder of New York real estate invest­ment firm Somerset Partners, sug­gest­ing that Trump SoHo might be avail­able in a “dis­tressed sale.”

Don’t love the loca­tion, but at the right price could be inter­est­ing,” Rubenstein wrote in an email seen by Bloomberg News. “Shall we take a look at this together?”

Rakishev liked the idea. “Can we look with detail and most impor­tant is price?” he replied.

One of Rubenstein’s asso­ciates sent Rakishev a spread­sheet that showed the devel­op­ment had sold less than a quar­ter of its units and had lost $3.6 mil­lion on its food and bev­er­age ser­vices in 2011, accord­ing to the doc­u­ments seen by Bloomberg News. Rakishev said he doesn’t recall review­ing the deal. A spokesman for Rubenstein declined to comment.

Two years lat­er, Rakishev acquired con­trol of BTA Bank in a series of trans­ac­tions with Kazakhstan’s sov­er­eign wealth fund. Today, the bank is lit­tle more than a hold­ing com­pa­ny, and its pri­ma­ry busi­ness is recov­er­ing the assets alleged­ly tak­en by Ablyazov.

As for Ablyazov, he hasn’t let go of his dream of top­pling Nazarbayev. He’s try­ing to res­ur­rect Democratic Choice of Kazakhstan, once the country’s biggest oppo­si­tion group, and he reg­u­lar­ly posts anti-Nazarbayev jere­mi­ads on his Facebook page.

The main task,” he said, “is to replace the dic­ta­to­r­i­al regime in Kazakhstan and build a coun­try on the mod­el of America and Europe.”

Kazakhstan’s Ministry of Justice may have oth­er ideas about Ablyazov’s future. Last month, Muratkhan Tokmadi, a wealthy busi­ness­man, said in a doc­u­men­tary broad­cast on Kazakh tele­vi­sion that in 2004 he mur­dered Erzhan Tatishev, BTA Bank’s co-own­er and first chief exec­u­tive offi­cer, at the direc­tion of Ablyazov.

Tatishev was killed by a gun­shot dur­ing a wolf hunt on Kazakhstan’s south­ern bor­der. For years, the shoot­ing was believed to have been an acci­dent. But in the doc­u­men­tary, Tokmadi said Ablyazov instruct­ed him to make it “look like an acci­den­tal killing.”

Prosecutors have opened an inves­ti­ga­tion. Kazakhstan’s Ministry of Justice told Bloomberg News that Tokmadi has agreed to cooperate.

Now they will accuse me of mur­der,” Ablyazov said in Paris, adding that he had nev­er met Tokmadi.

A mur­der charge against Ablyazov would just be the lat­est twist in a saga that has already fea­tured a cyber­at­tack, a fugi­tive banker and links with Trump’s real estate empire.

For years, this case has been a civ­il war played out in the courts,” said John Howell, a British finan­cial-crime con­sul­tant who assist­ed BTA Bank in its efforts to uncov­er whether Ablyazov com­mit­ted fraud. “Now, with a crim­i­nal case poten­tial­ly com­ing in, the hunt for BTA’s assets may pick up new momentum.”

— With assis­tance by David Voreacos

By Edward Robinson , Hugo Miller , and Nariman Gizitdinov

Was Trump SoHo Used to Hide Part of a Kazakh Bank’s Missing Billions?