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BTA BANK JSC AND THE CITY OF ALMATY OBTAIN COMPLETE WIN FROM AN AMERICAN JURY AGAINST CONSPIRATORS OF MUKHTAR ABLYZOV AND VIKTOR KHRAPUNOV

Following a three-week trial, a jury of four men and five women sitting in the United States District Court for the Southern District of New York returned a jury verdict today in favor of the City of Almaty, Kazakhstan, and BTA Bank JSC on all claims against Felix Sater, Bayrock Group, Inc., Global Habitat Solutions, and MeM Energy Partners LLC.  The jury ruled in favor of the City of Almaty and BTA Bank on claims of conversion, unjust enrichment, and money had and received, and also awarded punitive damages against Sater as punishment for his particularly morally culpable conduct.  In total, the jury awarded the City of Almaty and BTA Bank more than USD $32,000,000, including interest—a figure in excess of what BTA and Almaty asked for in compensatory damages.  The jury deliberated for less than half a day.  The Honorable John G. Koeltl, United States District Judge for the Southern District of New York, presided over the trial and received today’s verdict.

The trial, which began on 10 June 2024, involved overwhelming evidence of Mukhtar Ablyazov’s fraud on BTA Bank and, for the first time in a Western court, Viktor Khrapunov’s fraud on the City of Almaty.  As the evidence presented during the course of the trial demonstrated, Ablyazov abused his position of power at BTA to orchestrate billions of dollars in fake loans, ultimately causing the bank—which at the time of the revelation of Ablyazov’s fraud was Kazakhstan’s third-largest—to fail. 

The trial was also the City of Almaty’s first opportunity (with the assistance of the Ministry of Justice of the Republic of Kazakhstan) to demonstrate to an American jury the fraud perpetrated by former mayor Viktor Khrapunov, who abused his position of power to privatize state-owned land and sell it for below-market prices to companies controlled by him or his wife—and in some cases, ultimately to companies controlled by Mukhtar Ablyazov.  Viktor Khrapunov’s fraud caused the people of Almaty more than $300 million in losses, in addition to resulting in various parcels of land in major urban centers to go undeveloped.

The trial evidence demonstrated that the money stolen by Ablyazov and Viktor Khrapunov was commingled, and Ilyas Khrapunov—Viktor’s son and Ablyazov’s son-in-law—was charged with laundering a large portion of it.  Ilyas, just 23 at the time, turned to Felix Sater to assist him in laundering the stolen money into the United States.

Sater, who the trial evidence demonstrated was convicted of assault in 1993 and racketeering in 2009—including predicate acts of securities fraud and money laundering—helped Ilyas invest more approximately $40 million of the stolen funds into the United States, including in multiple real estate projects and at least two private equity investments.  One of those private equity investments was also used by Sater to fraudulently obtain an investment visa for Ilyas’s sister, Elvira Kudryshova.  Bayrock Group, Inc. and Global Habitat Solutions are companies wholly-owned by Sater, which he used to further hide the stolen money.  MeM Energy Partners LLC, a company wholly-owned by Mendel Mochkin, was also responsible for helping Sater to invest the stolen money in the U.S. financial system.

Over the course of the approximately three-week trial, the jury heard testimony from a variety of witnesses, including former employees of UKB-6 – the division within the bank during Ablyazov’s tenure responsible for the fraud – as well as American investors who dealt in the stolen funds, individuals involved in the money laundering scheme, and a variety of experts in forensic accounting, fraud and money laundering, real estate, immigration, and handwriting analysis.  The jury was also presented the testimony of the key co-conspirators, including Gennady Petelin, who was held out as the legitimate source of the money being invested, Ilyas Khrapunov, who oversaw the U.S. investments, Elvira Khrapunova, who was inserted as the nominal owner of various companies to disguise its true ownership, and from Viktor Khrapunov and Mukhtar Ablyazov themselves.

Sater and Mochkin also testified at length, and were cross-examined over the course of three days by BTA’s long-time U.S. counsel at Boies Schiller Flexner LLP.  During the course of that examination, both Sater and Mochkin admitted that they invested the funds despite knowing about the allegations of fraud against Ablyazov and Khrapunov; despite knowing about the judgments and worldwide freezing orders entered by the English High Court of Justice; and despite knowing about Ablyazov’s criminal contempt sentence in England and his subsequent arrest in France.  Sater and Mochkin also admitted that they assisted Ablyazov, Ilyas Khrapunov, and Ablyazov’s long-time “main man” Peter Salhas in trying to attack the legitimacy of the English judgments and freezing orders, including by advancing a false conspiracy theory about corruption in the English courts and by suggesting a propaganda campaign that involved using an army of avatars to create false social media interest in stories favorable to Ablyazov.

In returning a verdict in favor of the City of Almaty and BTA Bank today, the jury necessarily rejected their testimony and concluded that they knowingly laundered money stolen by Ablyazov from BTA Bank and by Viktor Khrapunov from the City of Almaty.  The jury also rejected Sater’s defense that he had been released.  The trial evidence demonstrated that Sater concealed his involvement with a consultant to obtain that release.  The jury deliberated for less than half a day, reflecting the overwhelming strength of the evidence presented by the City of Almaty and BTA Bank.

Just hours before the start of trial, two other defendants—Daniel Ridloff and RRMI-DR LLC—settled the claims against them, agreeing to return to Almaty and BTA all of the stolen money that they received.  At BTA and Almaty’s request, Judge Koeltl entered judgement against RRMI-DR.  A seventh defendant, Ferrari Holdings LLC, is in default; in light of today’s verdict, BTA and Almaty will be seeking judgment against it, as well.

Matthew L. Schwartz, Chairman-elect and Managing Partner of Boies Schiller Flexner LLP and counsel to the City of Almaty and BTA, said: “Once again, an American jury has listened to the overwhelming evidence of Mukhtar Ablyazov’s fraud on BTA Bank and returned a unanimous verdict against his co-conspirators.  And today, for the first time, an American jury also unanimously returned a verdict in favor of the City of Almaty for the fraud perpetrated by Viktor Khrapunov.  The American jury system is the gold standard for international justice, and today the jury spoke clearly.  We are privileged to have been able to present this evidence to a U.S. jury, and are thrilled with the verdict in favor of our clients, including the jury’s imposition of punitive damages for the deliberate and particularly morally culpable conduct of Felix Sater. We thank the jury for its careful attention to the evidence.”

This is the second time in less than two years Boies Schiller Flexner has secured a unanimous jury verdict for BTA Bank in claims against Ablyazov’s co-conspirators.  Today’s verdict follows a 2022 verdict in the United States District Court for the Southern District of New York, also after a jury trial, against Triadou SPV S.A., a company controlled by Ilyas Khrapunov.  During the course of those proceedings, BTA and Almaty successfully demonstrated that Ablyazov, Ilyas Khrapunov, and Viktor Khrapunov disobeyed court orders, destroyed evidence, and refused to make required disclosures.  As a result, various judges of the United States District Court for the Southern District of New York entered numerous orders sanctioning Ablyazov and the Khrapunovs, and ultimately held Ablyazov and Ilyas Khrapunov in contempt.