By Stephanie Baker and Jonathan Browning
May 14, 2022 (Bloomberg) –In the race to seize assets tied to sanctioned Russian billionaires, US authorities are alleging that a Russian tycoon acted as the “straw owner” of two yachts worth more than $1 billion, including the $700 million Scheherazade, a superyacht linked to Russian President Vladimir Putin.
Court filings in the South Pacific island of Fiji, where the US is trying to seize the $325 million yacht Amadea, reveal what US officials allege is a nest of offshore shell companies that were set up with the help of a yacht broker to conceal the true owners of both vessels — an allegation that lawyers for the listed owner and the broker dispute. A hearing is scheduled for Wednesday in Fiji on the fate of the Amadea.
The layers of companies and trusts, stretching from the Marshall Islands to Switzerland, indicate the beneficial owner of both yachts is the former president of state-controlled Rosneft OJSC, Eduard Khudainatov, according to the documents. Khudainatov doesn’t appear on any sanctions lists. But the US alleges the “true beneficial owner” of the 348-foot Amadea, which features a helipad, a mosaic-tiled pool and a lobster tank, is Russian gold billionaire Suleiman Kerimov, who was first sanctioned by Washington in 2018.
“The fact that Khudainatov is being held out as the owner of two of the largest superyachts on record, both linked to sanctioned individuals, suggests that Khudainatov is being used as a clean, unsanctioned straw owner to conceal the true beneficial owners of these vessels,” according to an affidavit by a special agent with the US Federal Bureau of Investigation, filed in the Fiji court proceedings. “While Khudainatov is wealthy, there is no reason to believe he has the financial resources to purchase both the Amadea and the Scheherazade, which are collectively worth more than $1 billion.”
That April 22 affidavit, which Bloomberg News has reviewed, reveals previously redacted details from a US seizure warrant for the Amadea that was filed in federal court in Washington. It describes interviews with rival yacht brokers, crew members and emails, presented as evidence that the Amadea is really owned by the 56-year-old Kerimov, who is worth $15.6 billion, according to the Bloomberg Billionaires Index. His family held a stake in Polyus, Russia’s largest gold miner. A lawyer for Kerimov and a Polyus spokesperson did not respond to requests for comment. A lawyer for the Amadea’s registered owner has written that the US effort to seize the yacht is based on hearsay evidence that doesn’t prove its true owner is Kerimov.
The US affidavit cites evidence that Kerimov family members requested long-term changes to the Amadea consistent with owning, rather than renting it. They were involved in approving the installation of a new pizza oven, a particular brand of “spa bed” and repositioned electric sockets on the vessel, the affidavit says. It references a document titled “Bosun Handover Notes” discussing Kerimov’s preferences for an upcoming trip, including “a specific gym setup.” Each of Kerimov’s family members was given a codename by crew members, with the tycoon himself referred to as G0.
“Apparently G0 has two things that have to be immaculate. Stainless and teak,” the document says. “G0 has requested the quickest [jet skis] available so we will be getting new ski’s at some point.”
In sanctioning Kerimov in 2018, the US said he was part of a group of oligarchs who profit from the Russian government through corruption and malign activity around the globe, citing his role as a member of the Federation Council, the country’s upper house of parliament.
Born in Dagestan, in Russia’s North Caucasus region, Kerimov got his start as an economist before building up stakes in a bank, an airline and an oil trading company in the country’s chaotic transformation in the late 1990s. He made his fortune under Putin trading shares of the country’s biggest and most politically sensitive companies, including state-controlled gas giant Gazprom PJSC and the country’s biggest bank, Sberbank. As his fortunes have ballooned and contracted over the past 20 years, Kerimov earned a reputation as a kind of Jay Gatsby of Putin’s Russia because of his penchant for throwing glitzy parties on the Riviera, including a 2008 bash featuring Beyonce.
Following Russia’s invasion of Ukraine in February, an unprecedented round of sanctions targeted an even longer list of Russian billionaires, and the US stepped up enforcement, including a hunt for multimillion-dollar superyachts. Those moves sent vessels like the Amadea racing across the globe to jurisdictions not enforcing US sanctions.
The US affidavit alleges that the Amadea was sold to Kerimov in 2021 by a yacht brokerage referred to as Company A. Three people familiar with the matter told Bloomberg News that the broker is Imperial Yachts, a Monaco-based firm.
According the affidavit, the broker paid fees in US dollars on behalf of the Amadea in 2022 for entry and exit to and from Anguilla in violation of US sanctions against Kerimov and his property. Imperial manages the Amadea, including hiring crew, arranging safety inspections and administering running costs, people familiar with the situation say. Annual running costs are between $25 and $30 million, according to the affidavit.
“Company A has a practice of concealing yacht ownership behind nested shell companies and listing a straw, unsanctioned individual as the beneficial owner behind the shell companies in order to conceal the true beneficial owner,” the affidavit says.
Simon Clark, a lawyer for Imperial Yachts, said in an email that the broker does not deal with sanctioned people. He said the firm maintains that Kerimov is not the owner of the Amadea, “and as such Imperial Yachts has not violated sanctions in making the payments” described in the April 22 affidavit. Clark said the brokerage is aware of the claims contained in that filing and said Imperial has engaged lawyers “to challenge the assertions.”
Founded by Evgeny Kochman and his sister Julia Stewart in 2005 in Monaco, Imperial has overseen the construction and management of dozens of superyachts. It oversaw the building of the Scheherazade, but Clark said the broker is not that vessel’s operational manager. The 459-foot superyacht is currently being held at a port in Tuscany by Italian authorities because they believe the owner has links to “prominent elements of the Russian government.” Russian opposition leader Alexei Navalny’s team reported in March that the Scheherazade was staffed with people who worked for the security agency protecting Putin. The US has taken no public action against the Scheherazade.
The registered owner of the Scheherazade, thought to cost about $700 million, is also Khudainatov through Bielor Asset Ltd., a company set up in 2020 in the Marshall Islands by KPM Consulting Ltd., the US affidavit in Fiji says. KPM Consulting recently told the Trust Company in the Marshall Islands that the beneficial owner is Khudainatov, according to the affidavit, which also says the Scheherazade was “linked” to Putin.
A little over a year after Bielor Asset Ltd. was established, a long chain of shell companies was set up to organize the ownership of the $325 million Amadea. Khudainatov is listed as the ultimate beneficial owner of the yacht through Millemarin Investments Ltd., which in turn is owned by Invest International Finance Ltd., both registered in the British Virgin Islands, according to documents prepared by Millemarin’s lawyer that Bloomberg News has seen. Invest International is owned by Boltenko Trust AG, registered in Zurich, which in turn is trustee of the September Trust, with Khudainatov as the “economic settlor,” according to the documents. The sale was financed through two other offshore companies with Khudainatov as the beneficial owner — one in the Cayman Islands and another in the BVI, the documents say.
Khudainatov is not listed on any recognized ranking of billionaires. He left Rosneft in 2013, reportedly to set up his own oil firm. He’s known to be a close associate of Igor Sechin, Rosneft’s CEO, who is considered a confidant of Putin.
The use of multiple layers of shell companies in offshore jurisdictions can obscure the ultimate beneficiary of assets. Efforts by US authorities to enforce sanctions against associates of Putin are bumping up against this kind of secrecy, making the seizure of some assets a drawn-out affair. Another complication: Russian billionaires are known to operate by unwritten arrangements with others or understandings that often leave no paper trail, which makes proving such agreements in court difficult. A number of Russian tycoons have brought disputes to UK courts over unofficial business arrangements that weren’t spelled out in any legal document.
If the US succeeds in seizing the Amadea, it would be subject to US forfeiture rules, which have a lower standard of proof than that needed in a criminal case. Filings in the US and Fiji show that US officials have gone to great lengths not only to detain the Amadea but also to seize it and try to sail it to US waters. The US filed a seizure warrant application in Washington on April 13 stating that Kerimov and those acting on his behalf had “caused US dollar transactions for the Amadea to be sent through US financial institutions” in violation of sanctions. That same day, authorities in Fiji searched the superyacht and found documents detailing various financial transactions. Fiji’s High Court ruled on May 3 that US officials could seize it.
“This yacht seizure should tell every corrupt Russian oligarch that they cannot hide — not even in the remotest part of the world,” Deputy Attorney General Lisa Monaco said in a statement on May 5. That day FBI agents and US Marshals boarded the vessel with plans to sail it away.
But Feizal Haniff, the lawyer for Millemarin, secured a temporary stay to delay the seizure on May 6. In documents he prepared to submit to the court with his application for the stay, Haniff argued that Fijian law doesn’t allow for US authorities to seize the vessel, only to restrain it at this stage of the case. In the end, he didn’t have to file those documents or others he’d prepared; the court quickly granted the stay without requiring them.
“What the US authorities are saying is that Khudainatov and Mr. Kerimov have a ‘side deal’ between them,” Haniff wrote in his planned court submissions. “The request by the US authorities relies on hearsay evidence of unidentified individuals to assert that Mr. Kerimov is the beneficial owner of the Amadea.”
Haniff wrote that US authorities’ conduct in Fiji has been “appalling,” saying they offered crew members “obscene amounts of money” to sail the Amadea to the US and threatened them with visa cancellations if they didn’t agree. He said US officials have not said where they will take the vessel or how they will maintain or insure it. The Amadea has “delicate silk and furniture,” “sensitive carpets” and “gilded metal fittings” that require a temperature- and humidity-controlled environment to avoid “irreversible damage,” he wrote. A Fiji court will consider Haniff’s appeal of the previous seizure ruling on Wednesday.
In its investigation, the FBI concluded that in late 2020 or early 2021, Kerimov personally toured the Amadea before it was sold around August 2021, the affidavit said. Interviews with crew members detailed trips by Kerimov family members, who were referred to by code names: G1 for his wife, G2 for one of his daughters, G3 for his son.
Several Kerimov family members were on the Amadea in the Caribbean in January 2022, and Kerimov’s daughter was on the superyacht in France in October 2021, the affidavit says.
In an email dated Feb. 24, 2022 — the day Russia invaded Ukraine — the Amadea’s captain described a meeting with one of Kerimov’s daughters about setting the superyacht’s travel agenda for 2022-2023 and purchasing new water sports equipment, according to the affidavit.
That same day, as Russian tanks rolled across Ukraine’s border, the Amadea turned off its automated information system, which transmits the ship’s position. It began sailing from the Caribbean, where it was moored off Sint Maarten, through the Panama Canal to Mexico and then on to Fiji, where it arrived around April 12, the affidavit says. Paperwork filed by the Amadea indicated it planned to leave two days later for the Philippines, but US authorities believed the next destination would be Vladivostok “or other waters in Russian territory,” according to the affidavit. It said that one crew member’s phone had a text message that read “We’re not going to Russia,” followed by a “shush” emoji.
When the Amadea was in Mexico in late March, it filed a customs declaration indicating it was carrying $102,675 in cash and more than 17,000 in euros ($17,700). During their search of the vessel, Fijian authorities found documents detailing transactions on behalf of the Amadea, including instructions for wire transfers to be paid in US dollars.
This isn’t the first time legal authorities have accused Kerimov of using a frontman. In 2017, he was detained in France on charges of money laundering. He paid 40 million euros in bail and was put under house arrest at his luxury villa in Cap d’Antibes. French prosecutors alleged Kerimov laundered money and evaded taxes by buying four villas on Cap d’Antibes through sham transactions and under-the-table payments using a frontman named Alexander Studhalter, a Swiss businessman who worked with the Russian billionaire for two decades. Kerimov and Studhalter denied wrongdoing. The charges were dropped in 2018, but the French authorities opened a new investigation into tax fraud involving Kerimov in March 2019. That case is ongoing, and lawyers for Kerimov have denied any wrongdoing.
© 2022 Bloomberg L.P.
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