Billionaires Ihor Kolomoisky and Gennady Bogolyubov used to own Privatbank -- the largest bank in Ukraine -- and now they are being sued for using it for a decade to launder more than $470b (through its Cyprus subsidiary) ($470b is more than double the GDP of Cyprus over the same period).
The bank's new owners are suing Kolomoisky and Bogolyubov for violating Ohio and Delaware racketeering laws. They claim that Kolomoisky and Bogolyubov used the laundered proceeds to buy up whole neighborhoods in Cleveland, becoming the city's largest landowner. Additionally, they are accused of buying "several ferroalloy companies across multiple states" with laundered proceeds.
It's the largest money-laundry scandal in history and it was only possible because US states allow anonymous parties to create thousands of cheap shell companies.
The money trail is surprisingly simple. To begin with, the ultimate beneficiary owners collect retail deposits in Ukraine by offering good conditions and service. The money then flows to their subsidiary, PrivatBank Cyprus. In Cyprus, they benefit from the services of two local law firms.
Untypically, the ultimate beneficiary owners did not take the precaution to establish multiple layers of shell companies in Cyprus, the British Virgin Islands, and Cayman Islands, as is common among Russians with seriously dirty money. Instead, they operated with three US individuals in Miami, who helped them to set up a large number of anonymous LLCs in the United States, mainly in Delaware, but also in Florida, New Jersey, and Oregon.
The typical objects of post-Soviet money launderers are real estate in New York and southern Florida, but the investment profile of this group is different. They invested in real estate in Cleveland, Ohio; Harvard, Illinois; and Dallas, Texas, and in ferroalloy companies. According to the suit, the defendants purchased commercial real estate for millions of dollars in Cleveland and became the biggest owner of real estate there. It has been reported that the FBI investigated Kolomoisky’s business in Ohio for money laundering.
How Kolomoisky Does Business in the United States [Anders Åslund/Atlantic Council]