Russian ‘Bad Debts’ Banks Expand Fraud Suits Against Ex-Top Managers and Ex-Owners

Russian state-controlled lenders The Bank of Non-Core Assets (Bad Debts), created on the basis of National Bank Trust PJSC, and the bank FC Otkritie continue expending anti-fraud litigations against their Ex-Top Managers and Ex-Owners.

Recently, the lawsuit was filed in the United States against the former founder of financial group Otkritie Holding, Vadim Belyaev. The statement of claim entered the electronic database of the court in the New York area of ​​Manhattan.

As follows from the court documents, the Russian banks Trust and FC Otkritie are the plaintiffs. They are seeking to “recover hundreds of millions of dollars of assets that have been misappropriated” through fraud. The plaintiffs note that Belyaev, who has citizenship of the Russian Federation and Cyprus, currently lives in the state of New York.  According to the plaintiffs, Belyaev, “being the largest shareholder of the Otkritie Holding group, had full control over it and its subsidiaries.” He allegedly “repeatedly used this to withdraw assets from the structures belonging to the Otkritie Holding group for his own purposes and in the interests of his entourage.” The document states that for this purpose, Belyaev used “a network that included more than 150 shell companies.”

It should be noted that in August 2018, the bank FC Otkritie lodged several other claims against nine ex-managers. The bank sought to invalidate certain deals and recover the money from the defendants.

In 2019 the bank FC Otkritie filed a new 289.5-billion-ruble claim against five former top managers with Moscow Commercial Court.

In early 2020, following an eight week trial held in late 2018, the High Court handed down judgment finding against the former majority shareholders of National Bank Trust who were alleged to have misappropriated over $1billion of Bank funds via a sophisticated network of offshore companies.

Also, in 2019 National Bank Trust launched London proceedings against Russian oligarch Boris Mints and his sons, and against the former executives and owners of B&N Bank. The claimants accused the former executives B&N Bank and the bank FC Otkritie of authorizing dubious transactions involving bonds of Boris Mints’ O1 Group. The transactions, worth close to $1 billion, took place shortly before the 2017 bailouts of Otkritie and B&N Bank and their subsequent takeover by the Russian central bank.

Russian ‘bad debt’ banks, controlled by the state, begin implementing a more aggressive and effective foreign litigation strategy against their ex-top managers and ex-owners and ex-top managers and ex-owners of their debtors. It means that foreign businesses, especially financial, involved in transections with the potential defenders in fraud litigations, may be considered as co-accomplices in allegedly fraudulent transactions and urged to participate in lengthy and costly international disputes. Even businesses dealing with well-know and reputable Russian and CIS counterparties should reconsider their compliance programs towards more stringent approach to their clients’ ‘historic’ and current legal problems.

If you would like to discuss any issues regarding CIS practice that your business might be facing, then please contact our consultant Dmitry Gololobov on 07921 160 108 or at dmitry.gololobov@ilaw.co.uk.