Otkritie Wins $150 Million in Suit as Fraud Funds FerrarisJeremy Hodges
Otkritie Financial Corp. won $150 million in damages after a London judge said ex-employees siphoned off the Moscow-based bank’s money to pay for luxury villas, diamonds and Ferraris.
Judge Bernard Eder said the trial, with more than 20 witnesses, was filled with allegations of money laundering, kidnap and murder. Otkritie sued former employees, including George Urumov and Ruslan Pinaev over what the company says was the mispricing of Argentine warrants and bonuses for colleagues.
When Urumov joined the bank in 2011 he said that he would bring four colleagues with him if they each received $5 million in “golden hellos” while he secretly negotiated lower amounts, according to the lawsuit. The warrant fraud was committed by manipulating the U.S. dollar-Argentine Peso exchange rates, the bank says.
“It is, in my judgment, nothing less than a brazen and carefully orchestrated deceit on the part of Mr. Urumov on a grand scale,” Eder said in his 200-page ruling today. “Anyone sitting in court listening to the evidence and the parties’ respective submissions might have been forgiven for supposing that they were in the Old Bailey,” London’s Central Criminal Court, “rather than in the Commercial Court.”
Lawyers representing Urumov and Pinaev at the firm Farrer & Co LLP in London didn’t immediately respond to a call for comment.
The fraud proceeds were laundered through offshore companies and bank accounts, Eder said. The employees spent the proceeds of the fraud on luxury villas in Spain and yellow and pink diamonds while Pinaev spent over $1.3 million on two Ferraris.
“We moved decisively to bring these people to account, to recover our funds and to ensure none of our clients were affected,” Alexey Karakhan, a deputy chief executive officer of Otkritie, said in an e-mailed statement. “We will leave no stone unturned to recover the stolen assets from the fraudsters, their accomplices and third parties who gave or are still giving them assistance.”
The bank has recovered $52 million to date and there is a criminal investigation into money laundering at a Luxembourg fund set up by Pinaev and Urumov, which saw $11 million of the fraud proceeds, the company said.
Judge Eder said criminal investigations had begun in various countries, including England, Russia and Switzerland.
Born in Ossetia in 1979, Urumov has dual Russian and British nationality, according to the ruling. He worked for Knight Capital Group Inc. prior to joining Otkritie where he was a securities trader. He earned $2.5 million a year at Knight, according to the ruling. He and his wife, also a defendant in the case, benefited from the fraud by as much as $45 million, Eder said in his ruling.
Moscow-born Pinaev was global head of Otkritie’s Eurobond trading, according to the ruling. He is now on the run in Israel, to evade criminal charges made against him in Switzerland, the bank said in its statement.
“In my view, it was nothing less than blatant dishonesty by each of these individuals driven by simple greed and self-interest on their part,” Eder said.
There were 19 defendants in the trial including various holding companies used to channel the fraud proceeds.