Ex-Otkritie Trader Gets 12 Years for ‘Arrogant’ Bonus Fraud

  • Urumov used money to buy house in tony London neighborhood
  • Ex-Threadneedle trader Gersamia sentenced to seven years

Former Otkritie Financial Corp. trader George Urumov was sentenced to 12 years in prison by a London judge for his role in a series of "greed" driven schemes to siphon money from bond trades and bonus agreements to fund a lavish lifestyle, including a 19-million-pound house ($24 million) in a leafy London neighborhood.

Urumov’s sentence, at the top end of the possible prison term, came two days after he was found guilty by a jury of mispricing Argentine warrants in a bid to steal more than $100 million. A former trader at Threadneedle Asset Management, Vladimir Gersamia, was given seven years in prison for his role in the bond scheme.

The sentence brings to an end years of battles in London civil and criminal courts for the 37-year-old Urumov, who convinced Otkritie to pay him and his fixed income team $25 million in a signing-on fee to be shared equally. The reality was that Urumov gave $4.7 million to four colleagues, paid off co-conspirators at the Russian bank and moved the rest through several off-shore companies he controlled.

"You have shown a disdain and disregard throughout" the trial, Judge Deborah Taylor told Urumov. He did everything he could to "deflect blame" onto others. "Motivated yourself by greed, you played on the greed of others."

Urumov and Gersamia were accused of manipulating the U.S. dollar-Argentine peso exchange rates of the warrants by convincing bosses in 2011 that a class of Argentinian bonds was worth four times its real value. That allowed them to buy the assets and keep the difference for themselves.

On one trade, bosses at Otkritie were deceived into purchasing 1.65 billion Argentine peso denominated warrants at a price of 12.937 per cent in U.S. dollars when in fact the bonds were only around $62 million, meaning the bank overpaid by around $150 million.

Hayes, Peterson

The sentences follow a series of harsh penalties meted out to defendants in financial-fraud cases. Former Libor trader Tom Hayes is serving an 11-year sentence for rigging the benchmark rate while Weavering Capital (UK) Ltd. founder Magnus Peterson is serving 13 years for a string of offenses that cost his clients about $536 million.

"These sentences, which are at the upper end of the spectrum, certainly continue the trend of ’white collar’ defendants being given increasingly severe punishments," said Christopher David, a London lawyer at WilmerHale.

Heinous Conduct

Moscow-based Otkritie said it has been able to recover more than $100 million of the money taken in Urumov’s schemes.

"From the outset, we pledged to do everything possible to ensure that justice would be done and that the fraudsters would be held responsible for their heinous conduct," Alexey Karakhan, chairman of the board at Otkritie Holding, said in a statement.

Urumov’s wife, Yulia Balk, and an Otkritie colleague, Alessandro Gherzi, were cleared of several fraud and money-laundering accusations by the jury Wednesday, following a three-month trial.

“They went to great lengths to try and launder the money by using the international banking system," said Detective Superintendent Maria Woodall of City of London Police.

Abbey Road

Urumov personally gained $40 million from the frauds while Gersamia made $6 million, the judge said Friday. Urumov and his wife used some of the money to buy the house in the affluent north London neighborhood of St. John’s Wood, which was home to the Beatles’ Abbey Road Studios.

"To draw the scent away, you created a smoke screen of falsehoods," Judge Taylor said. He showed "arrogance and disregard."

In a 2014 civil lawsuit brought by Otkritie, the judge said in his ruling that the actions of Urumov and his 36-year-old wife were "nothing less than a brazen and carefully orchestrated deceit on the part of Mr. Urumov on a grand scale.”

The civil trial heard allegations of the proceeds being spent on luxury villas in Spain and yellow and pink diamonds, while one defendant spent more than $1.3 million on two Ferraris.

Several other co-conspirators in the fraud who weren’t on trial in London have faced sanctions. Sergey Kondratyuk, Urumov’s friend and colleague at Otkritie who got a kickback from the bonus fraud, was convicted in a Swiss court and was released in 2013 after a short jail term.

Ruslan Pinaev, Otkritie’s ex-head of eurobond trading, fled to Israel where prosecutors say he still lives. Swiss authorities are trying to extradite him.

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