The Chatila jewellery emporium in Geneva is known by the world’s super-rich cognoscenti for being one of the select few destinations for the world’s finest diamonds. While its Bond Street store in London attracts a celebrity crowd, its flagship in Geneva pulls in the more discreet financier types. Its vaults boast one of the world’s very few red diamonds, and the historic 61.37 carat deep red ruby, The Burmese Excellence.
With such an inevitably wealthy clientele, it was not entirely out of the ordinary when, one October day in 2011, a well-set gentleman walked in and bought a 10-carat diamond ring for $1.7m (£1m). He faxed a payment instruction to his Swiss private bank Bordier, agreeing to collect the piece later that week. When he returned a couple of days later, it was with his attractive Latvian wife, and not only did they pick up the ring, but they bought two more, this time with pink and yellow diamonds, costing $2m.
They were not the only transactions that London-educated Ruslan Pinaev and his wife Marija Kovarska made, according to a High Court judgment this week. Later that day, they visited Bordier and withdrew 500,000 swiss francs (£335,000) in cash, plus a further 2m swiss francs in a bankers’ draft.
Soon after, the couple disappeared to Tel Aviv, leaving behind the two Ferraris Ruslan had previously bought for $1.3m.
More than two years on, lawyers for Pinaev were claiming in a London civil court that the diamond purchases were made as an “investment strategy” due to his concerns about the state of the eurozone.
This week, Mr Justice Eder begged to differ. In his judgment in an action brought by Russia’s biggest privately owned bank, Otkritie, against Pinaev and others, he declared that “the truth is that the rings were intended to be easily portable for the journey to Tel Aviv – where one of the world’s biggest diamond markets happens to be located and diamonds can be re-cut, re-sold and disappear for a small additional cost”.
According Mr Justice Eder’s judgment, Pinaev and a group of co-conspirators were rushing to vanish the proceeds of an international fraud that had scooped them $150m. Pinaev had previously spent $24m on a villa in Geneva, which Marija had been lavishly decorating with antiques she travelled as far as Cuba to find.
Another of the group, Georgian-born Vladimir Gersamia, was being a little less sophisticated in his spending.
He allegedly blew more than $72,000 on travel and holidays; $34,000 on shopping and luxury goods; $105,000 on “restaurants, nightclubs and brothels”; and more than €27,000 (£22,000) at one nightclub in Sardinia on a five-day trip, where he had hired a Lamborghini and a Maserati. Not to mention the Moscow restaurant where he spent more than $30,000.
Another in on the scam was Georgy Uramov who, with his wife, suddenly splashed out £19m on a house in London. Like Pinaev, his friend in Geneva, Georgy claimed that the house purchase was merely an investment decision for his company.
The judge begged to differ, describing that as “a deliberate lie”. The Uramovs had clearly been trying to disappear ill-gotten gains, he declared.
The fraud itself was masterly, complex and covered up rather brilliantly. Hogan Lovells, lawyers for its victim, deserve huge credit for its exposure, which involved the firm’s own global network plus 100 other lawyers and associates around the world.
According to the judgment, the scam came in three basic stages. Uramov, educated at London’s Cass Business School and the LSE, was the main player. A $2.5m-a-year “star trader” at the London branch of Knight Capital, he persuaded Otkritie to hire him and his four top-notch traders to their London office. As well as negotiating presumably lucrative pay deals, he persuaded the bank to give him a $25m signing-on deal for the team – $5m each. Such signing-on fees aren’t uncommon in the Alice in Wonderland City, believe it or not. But they usually get paid to the traders involved.
In this case, our Georgy, it is alleged, kept $8m for himself and split the rest in kickbacks to pals at Otkritie, including the diamond-loving Pinaev and Sergey Kondratyuk, another banker who was subsequently jailed over the fraud in Switzerland.
The second two stages are linked. Essentially, now at Otkritie, Uramov and his co-conspirators, the judge found, defrauded their bank with a big trade in esoteric Argentinian investments. Stage one can be called the “sucker trade”. The gang bought a relatively small number of Argentinian warrants and sold them on with an immediate $2.5m profit for Otkritie. But the profit was illusory, funded by the gang out of their own money to convince their bosses at the bank that the trading idea worked well.
With Otkritie softened up, the conspirators went in for the sting, with the help of party-loving Gersamia, a banker at London’s Threadneedle Investments, to play the part of the buyer. This time, they gathered together a far bigger load of the warrants, selling them on to Otkritie with the promise of a quickie on-sale to Threadneedle. By lying about the currency conversion, they managed to sell them to Otkritie for $150m more than they had actually paid, funnelling the difference via transactions and companies around the world described by the judge as “fake” or “sham”.
The judge ruled that Urumov, Pinaev, Kondratyuk and Eugene Jemai (all former Otkritie employees) and Gersamia had conspired to defraud the bank of $173m and used friends and families to launder the proceeds. He awarded Otkritie $150m damages from various defendants and offshore companies, which had denied wrongdoing.
City of London Police has arrested Urumov, his wife, the former Threadneedle employee Gersamia and others, taking their passports and releasing them on bail.
It may not be popular in some quarters that London’s courts have become the international go-to centre to settle business disputes, but it certainly makes for some fun cases.Reuse content