Serbian Venue Linked to €4bn Kazakh Banking Fraud

Belgrade’s premier exhibition hall and its neighbouring four-star hotel are tangled up in one of the world’s biggest ever banking frauds, BIRN has learned.

Maja Djuric, Ivan Angelovski, Lawrence Marzouk BIRN Belgrade, London

Some of the biggest names in popular music – from James Blunt to Morrissey – have graced the stage at Belgrade’s Belexpocentar, blissfully unaware of the venue’s links to a four-billion-euro banking fraud in faraway Kazakhstan.

An investigation by the Balkan Investigative Reporting Network, BIRN, has uncovered court material, company documents and emails that suggest the man at the centre of one of the world’s biggest corporate frauds, Kazakh banker and former opposition politician Mukhtar Ablyazov, was secretly the majority shareholder in the Belexpocentar and its neighbouring Holiday Inn hotel.

The High Court in London made a series of rulings between 2010 and 2014, finding that Ablyazov embezzled four billion euros from BTA Bank, one of Kazakhstan’s biggest banks, during his time as its chairman and undeclared majority shareholder.

The money was siphoned off through loans granted to hundreds of offshore companies involved in real estate projects that were secretly owned by Ablyazov,the court heard.

Lawyers representing BTA Bank argued the loans were not awarded on a commercial basis, were never supposed to be repaid and often no collateral was provided.    

The real estate projects that received BTA funds included New Belgrade’s Holiday Inn and Belexpocentar.

The complex, valued at 45 million euros, was implemented through Gainsford Investments Ltd – a company registered in the British Virgin Islands, BVI, and co-owned by two Serbian businessmen, Miladin Radjenovic and Aleksandar Spagnut, and, according to testimony heard by the London High Court, Ablyazov.

Ablyazov told BIRN he had no involvement in the Belgrade complex. He claims the global legal action launched against him by BTA Bank, including 11 claims lodged with the London High Court, stems from strongman Kazakh President Nursultan Nazarbayev’s desire to crush an opposition movement, which Ablyazov has supported.

Having fled the UK in 2012 after a British judge ordered his incarceration for contempt of court for failing to properly disclose assets, Ablyazov is now in a French jail awaiting extradition to Russia, where he faces allegations of committing financial crimes including claims related to Gainsford Investments. He is also wanted on fraud-related allegations in Ukraine and his native Kazakhstan. He denies all wrongdoing and is appealing against his extradition.

His two alleged Serbian business partners have not faced any criminal charges but have been caught up in the international legal battle between Ablyazov and BTA Bank.

In February 2015, the Belexpocentar and Holiday Inn hotel was sold to another impenetrable offshore company, Cyprus-based Tsitaco Limited, which, on paper, is owned by a Cypriot who appears to work as a volleyball coach. The sale was completed for just 10 million euros .

Auditors: BTA missing €8.8b


Photo: BIRN

Ablyazov, a former Kazakh energy minister, became chairman of BTA Bank in 2005 after he was released from prison having served one of a six-year jail term for ‘abuse of office’ following a presidential pardon. It is widely believed he was imprisoned because of his role in founding an opposition political party in the Central Asian state.

Prior to becoming BTA’s chairman he was already, secretly, the majority shareholder and his undeclared stake grew to 75 per cent during his tenure as head of the bank.

Between 2005 and 2009, he led BTA on a massive expansion across the former Soviet Union, backed by loans from western banks.

However, as the 2008 financial crisis gripped the world, the bank was facing insolvency and was forcibly nationalised in February 2009 through the Kazakh sovereign wealth fund Samruk-Kazyna as Ablyazov fled to London, according to the bank’s lawyers.

Ablyazov’s lawyer Peter Sahlas told BIRN that this was an “illegal nationalisation for political purposes” and the bank was not in financial difficulty.

Following Ablyazov’s departure, auditors at PwC identified an 8.8-billion-euro black hole in the balance sheets, and the bank launched 11 claims against the former chairman in London’s High Court.

While Ablyazov was chairman and undeclared majority owner of BTA, he also had a duty to its other shareholders and international creditors, who had provided 10.6 billion euros in loans. But, the bank claimed to the High Court in London that Ablyazov used BTA “as if it were his own private source of funds”.

He is alleged to have ploughed up to 5.3 billion euros into dozens of real estate projects that he owned through hundreds of secretive offshore companies, including the Belgrade complex.

The High Court has already ruled in favour of the bank’s claims of fraud relating to four billion euros of investments and is attempting to recoup the stolen funds by selling his assets – including palatial London properties.

Ablyazov’s lawyer, Sahlas, points to the fact that his client was debarred from presenting evidence in these proceedings because he had been found in contempt of court for not properly declaring his assets.

Fraud investigation leads to Belgrade complex


Photo: BIRN

Court papers, company documents and emails obtained by BIRN suggest that Ablyazov’s secret real-estate empire stretched as far as Belgrade.

These documents indicate two Serbian businessmen worked with Ablyazov from 2004 to invest tens of millions of euros of BTA Bank’s money in New Belgrade, building a four-star Holiday Inn and Belexpocentar, an international exhibition centre and concert venue.

The project was implemented by Belgrade-based Belexpocentar Doo which, in turn, was owned by BVI-based Gainsford Investments Ltd.

Gainsford Investment’s sole business was to build and own the Belgrade complex, according to company documents.

Lawyers working for BTA Bank told London’s High Court in 2010 that Gainsford Investments Ltd was jointly owned by Ablyazov and two unnamed Serbian business partners. They claimed Ablyazov held 70 per cent of the company shares.

BIRN has established that the unnamed Serbian business partners are Miladin Radjenovic and the now deceased Aleksandar Spagnut, both formerly listed as directors of Belexpocentar Doo. The two Serbian businessmen are not well known in their homeland but have strong commercial links to Russia.

Radjenovic cut his business teeth working in metal and mineral trading in Russia, before securing a job with the controversial commodities trader Mark Rich.

Spagnut, who died in 2013, had a lower profile than his partner but also had business dealings in the former Soviet Union.


Ablyazov’s ‘hidden assets’

According to evidence presented by BTA lawyers in London’s High Court, Ablyazov held 70 per cent of Gainsford Investments Ltd through another BVI-based company, Glintmill Investments. The Serbian investors’ 30 per cent stake was held through Albel International, based in the offshore jurisdiction of Delaware, US.

A Spokesperson for Intercontinental Hotels Group (IHG), parent company of Holiday Inn, said that Belexpocentar Doo signed a franchise agreement with IHG to open a hotel in 2005
 "As a franchisee they are responsible for the day to day operations and financial management of the hotel.

"IHG is committed to carrying out business with integrity and in accordance with the highest ethical standards. We undertake a thorough due diligence process for all contracting entities and use an extensive network of professional third parties to provide us with intelligence on heightened risk individuals and organisations."

London’s High Court heard claims that the Serbian investors had admitted Ablyazov was a joint shareholder of the Belgrade complex during a meeting with BTA bank in April 2009, monitored by a member of Kazakh intelligence service.

According to emails that were presented to the court and obtained by BIRN, Radjenovic was in contact with the bank’s UK lawyer Chris Hardman in 2010, following the start of legal action against Ablyazov .

The correspondence states Radjenovic and Spagnut wanted to talk to the lawyer about “our project Gainsford Investments” and restructuring its debt “after a meeting with MKA”, a well-known short form for Mukhtar Kabulovich Ablyazov. Radjenovic later wrote to Hardman to cancel the meeting.

BTA’s lawyers also claimed in court that Ablyazov’s interest in Glintmill Investments were revealed during Cypriot court proceedings, although BIRN has not been able to independently verify this.

The London High Court hearings were brought by BTA against Ablyazov in July 2010 as the bank asked judges for a receiver to be appointed to control the defendant’s assets and prevent him from selling or hiding his property.   

The judge, Mr Justice Teare, found in favour of the bank’s request but said he could not rule on whether Ablyazov held an interest in the Belgrade development based on the evidence presented.

New links uncovered


Further evidence obtained by BIRN details other links between Ablyazov and the Belgrade project.

While Gainsford Investments was based in the Caribbean and operated in Belgrade, its ties to Kazakhstan were numerous.

The offshore company’s original directors in 2004 were Radjenovic and an unknown Kazakh “risk analyst” Lola Auezova, according to documents obtained from the Serbian business registry .

The firm’s first board meeting was held in Almaty, Kazakhstan, in October 2004, at which Auezova and Radjenovic appointed Spagnut as director of the Belgrade-branch.

According to confidential Gainsford Investments Ltd documents obtained by BIRN, Ablyazov’s alleged front company for the scheme, Glintmill Investments, was based at the address of BVI law firm Aleman, Cordero, Galindo & Lee Trust (BVI) Ltd, which registers and administers companies in the offshore jurisdiction and had extensive dealings with the Kazakh.

Aleman, Cordero, Galindo & Lee Trust (BVI) Ltd and Totalserve, another company which administers offshore firms, represented 86 out of the 281 companies in the tax haven in which Ablyazov had a financial interest, according to court documents from the East Caribbean Supreme Court.

As investigators from BTA Bank trawled through Ablyazov’s network of companies for evidence of fraud, he appeared to sell his shares in Gainsford Investments in September 2009 to the Serbian investors, according to company documents obtained by BIRN.

The documents detailing the sale of Glintmill Investments’s 70 per cent shares in Gainsford Investments is signed by Radjenovic, listed as director of Albel International LLC.

And while Ablyazov transferred his alleged shareholding in the Belgrade complex, a condition of the sale was that he would receive an unspecified slice of any future sale of the assets, ensuring that he retained a financial interest in Serbia.

Russia’s extradition request to the French courts also references Gainsford Investments, according to Ablyazov’s lawyer Peter Sahlas. He said that it featured in a “long list” of companies that his client had allegedly helped in early 2009 by exempting them from loan repayments.

Sahlas, however, said the French court had not analysed these claims, which Ablyazov denies, and ruled only that it was “plausible he had embezzled funds”.
He is currently appealing the court’s decision to extradite him to Russia.


Russian expansion

Following the completion of the Belgrade complex, Spagnut appears to have launched an unsuccessful scheme with Ablyazov to develop a series of hotels across Russia through Moscow-based Rushotel LLC. A Linkedin profile in Spagnut’s name describes himself as “partner” in Rushotel LLC

Spagnut was also briefly listed as a small shareholder in Rushotel LLC.

Rushotel LLC and its majority shareholder - Cyprus-based Liftman Limited - have been placed under receivership following a London High Court ruling that they are at least partly owned by Ablyazov, according to court paperwork filed in the US and obtained by BIRN .

In a statement, Ablyazov told BIRN via his lawyers that he had no financial interest in the Belgrade scheme

“I have not at any time had any direct or indirect interest in Glintmill,” he said.

He also questioned why a representative of Kazakh intelligence was present at the 2009 BTA meeting at which it is alleged the Serbian investors revealed Ablyazov’s shareholdings in Glintmill.

“I do believe, however, that this demonstrates that the bank's business is being closely monitored by the state and is further confirmation of my contention that the bank's conduct is dictated by the president and government's political agenda,” he said.


The money trail

Radjenovic told BIRN the Belgrade complex was fully funded by BTA Bank and that Ablyazov was involved in the project, although he stopped short of revealing who was his co-owner through Glintmill Investments.

Company documents show that at least 17 million euros were transferred from the Gainsford Investments in the BVI to Belgrade’s Belexpocentar Doo for the construction of the complex, although Brako Trkulja, a senior management figure involved in the project, described it as a “45-million-euro project” in his online CV.

Despite Radjenovic’s assertion, there is no mention of BTA loans or collateral in either Gainsford Investments Ltd or Belexpocentar Doo accounts prior to May 2007, raising the question of whether the loan was properly registered.

Radjenovic said: “We [Gainsford] don't have connections with Ablyazov anymore - Ablyazov is the past.

“I can tell you that BTA Bank and Ablyazov was connected with the hotel – the bank has financed all that work, we received loans from BTA Bank, and Mr Ablyazov was the owner of the bank.”

Radjenovic said he would need to clear any further questions with his new bosses at the Holiday Inn, where he is now a director after selling the complex to another offshore firm. He subsequently declined to provide any further information.

BTA provided a 23.5-million-euro loan to Belexpocentar Doo in May 2007, just before the opening of the hotel and long after the Belexpocentar began operating. Shares in the firm were provided as collateral but it is not clear how the loan was spent.

Nemanja Nenadic, head of Transparency International’s Serbian branch, told BIRN that Serbia introduced new anti-money-laundering law in 2009, which brought the country in line with international standards and required more checks on the origin of funds, particularly by banks.

But successive Serbian governments have often been more interested in attracting foreign investment than verifying the source of the money, he argued.

“Even a government that wants to control it might find it very hard, in particular if the paperwork is clean at first glance,” he added.


Cypriot listed as new owner

With Ablyazov facing criminal proceedings in a host of jurisdictions, the Serbian investors struggled with loan repayments, according to emails shown in the London High Court and obtained by BIRN.

In December 2013, BTA launched court proceedings in BVI against Gainsford Investments Ltd over the failure to properly register its shareholders.

The case was eventually dropped by the bank but the Belgrade complex was sold in February 2015 when Tsitaco Limited, registered in another tax haven, Cyprus, bought Gainsford Investments’ stake in Belexpocentar Doo. The hotel and exhibition centre is now officially owned by Cypriot Marinos Stylianides, who appears to be a volleyball coach.

Despite the estimated 45million euros of investment, Belexpocentar Doo was sold for just 10 million euros.

The deal was made more attractive when, a month before the sale, BTA Bank provided an official note cancelling Belexpocentar Doo’s pledge for a 23.5-million- euro loan issued in 2007. This means that shares in the company are no longer collateral for the loan.

Documents from the Cypriot tax haven list Nicosia-based Marinos Stylianides as the owner and director of Tsitaco.  

The sole Facebook profile in that name relates to a volleyball coach for AC Omonoia Nicosia, who posted photos of himself in Belgrade at the same time the Tsitaco sale contract was signed in the Serbian capital. Stylianides did not respond to requests for comments through the social media profile and BIRN was unable to contact him, despite extensive attempts to trace him through calls to his club and family members.  

Dejan Starcevic, a businessman who was involved in the original plans to develop Belexpocentar and has organised a number of conferences at the venue, told BIRN: “The most important persons [in the scheme] are Aleksandar Spagnut, Miladin Vasa Radjenovic and Kazakh people.”

He was unable to say who was behind the Kazakh involvement.

This investigation is produced by BIRN as a part of Paper Trail to Better Governance project.

BIRN would like to thank Investigative Dashboard for its help tracing documents.

MIT & Virtu Meeting Notes


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