Kazakh BTA Bank: One Bank’s Tale In Europe’s Biggest Alleged Fraud
Few people have much time for banks right now but spare a thought for BTA Bank of Kazakhstan. Like many other banks it has lost billions of dollars over the last decade. Unlike many of its peers, however, it is making progress in trying to get them back. The vehicle for that is the biggest fraud case currently going on in Europe.
The latest step is a February 2 judgment in the Court of Appeal in London, which ruled in favour of BTA, building on previous findings in a series of global legal proceedings against Ilyas Khrapunov and the bank’s former chairman Mukhtar Ablyazov.
The case began when auditors PricewaterhouseCoopers identified a $10 billion hole in the bank’s balance sheets, leading to allegations against Abylazov and Khrapunov, who is married to Abylazov’s eldest daughter, Madina and currently based in Switzerland.
Ilyas Khrapunov is the son of Viktor Khrapunov – a former Kazakh energy minister and ex-mayor of the city of Almaty.
The search for BTA’s missing assets began in 2009 when Kazakh regulators took over the bank and turned its management over to Samruk-Kazyna AO, the central Asian country’s sovereign wealth fund, which in turn brought in PwC.
The BTA team, represented by lawyers Hogan Lovells, placed Ablyazov and his family under surveillance.
It also used asset-freezing orders, receiverships and lawsuits — the bank filed 11 separate actions against him in the High Court of London – in an attempt to force Ablyazov to return the bank’s money.
Will Kenyon, a London-based PwC forensic accountant at PricewaterhouseCoopers, unearthed deals in the loan book of an obscure BTA unit called UKB6 that aroused suspicions.
This led to allegations that UKB6 had issued billions of dollars of credit for scores of property developments and other deals in Belarus, Russia and Ukraine.
In one 2007 transaction, according to court documents, BTA allegedly loaned $76 million to a shell company based in the British Virgin Islands called AstroGold Corp. even though AstroGold had only $5,000 in capital.
In another, Ablyazov allegedly transferred $1.4 billion from the bank to entities he controlled by disguising the money as loans for projects such as a Caspian Sea oil platform, according to court records.
The recipients of the UKB6 loans were shell companies linked to a London-based investment firm called Eastbridge Capital, which was managed by Syrym Shalabayev, Ablyazov’s brother-in-law, according to court papers.
BTA has launched global legal proceedings against Ablyazov and his associates,at the High Court in London, seeking to recover more than US$6 billion in assets allegedly misappropriated by Ablyazov.
The bank has secured judgments for more than US$4.5 billion and is in the process of seeking to enforce those judgments against assets currently held in receivership.
Ablyazov was found guilty of contempt of court in February 2012 and sentenced to three concurrent 22-month prison sentences.
Ablyazov fled the jurisdiction before sentencing and was subsequently debarred from defending various claims brought against him by BTA Bank.
His appeals against the contempt and debarral orders were dismissed by the Court of Appeal in November 2012, with Lord Justice Maurice Kay observing that “It is difficult to imagine a party to commercial litigation who has acted with more cynicism, opportunism and deviousness towards court orders than Mr. Ablyazov.”
In February 2013, the UK’s Supreme Court refused Ablyazov’s application for permission to appeal the debarral judgment.
Nearly a year later a court in Aix-en-Provence, France, granted both the Russian and Ukrainian requests to extradite Ablyazov.
However, the decision was annulled by the French Court of Appeal because of a procedural error made by the court.
The case was sent for re-trial in the Court of Lyon. In October 2014, The Court of Lyon granted both Russia and Ukraine’s requests to extradite Ablyazov.
Ablyazov again appealed the decision. In March 2015, the French Supreme Court upheld the earlier ruling by the Court of Lyon to extradite him to Russia or Ukraine.
In October 2015, it was reported in the French media that the French Prime Minister had issued a decree for the extradition of Ablyazov to Russia.
Ablyazov remains accused of fraud in ongoing cases and is in contempt of court, having fled UK jurisciction. Interpol notices exist against him in Russia, Kazakhstan and Ukraine.
In October 2015, the UK Supreme Court ruled in favour of BTA on its appeal of Ablyazov’s use of “unusual loan arrangements” to circumvent spending restrictions contained in the English standard form freezing order.
Having been found guilty of contempt of court in 2012, Ablyazov fled the UK jurisdiction before sentencing and was debarred from defending various claims brought against him by BTA Bank. He was released from prison in France in December 2016 and remains in the country.
The cases are continuing. Acting for Khrapunov in February’s hearing was London-based Hughmans Solicitors, which was contacted for this article but has yet to comment. Ablyazov was previously represented by City lawyers Addleashaw Goddard but does not appear to be currently represented by a London legal firm.