I’ve written before on the story of how a Vancouver public company’s main source of revenues was supplying the precursor drug which allowed Mexican drug cartels to cook crystal meth in underground factories in California, which started the crystal meth epidemic across the United States, and caused countless untimely deaths.
As of 2021, 52,400 Americans had died from meth-related deaths.
Our Vancouver anti-hero, Dr. Death, the person who opened the door for crystal meth mass production for cartels, and its resultant mass deaths, sleeps like a baby in one of several mansions in Vancouver and one in Morocco.
I am told that he once had a sleepless night – the RCMP raided one of his mansions many years ago early one morning. Dr. Death and his wife, I am told, were highly irritated by the RCMP because a mansion was messed up; cushions were thrown around; drawers opened; papers looked at; trinkets from the homeland in Iran were touched.
The Middle Eastern group involved in moving the supply of precursors from Dr. Death was sending the money earned directly to the Hezbollah.
I knew there was a Middle Eastern terrorist organization benefiting financially from what little there is on the cases in the US court files (they are filed under seal as terrorism cases) but the Vancouver part of the case appears in a financial crime book published by a New York author. I called him, and according to him, it is the Hezbollah who was involved.
Hezbollah is a terrorist organization tied to Iran and Lebanon. Its leader is Hassan Nasrallah. Dr. Death is Iranian. You probably guessed that.
Seems odd – terrorist financing was going on in Canada for Hezbollah using the capital markets, and the end result is that the precursor kingpin accumulates mansions, and moves to other public companies, raising more money to cure cancer. Or is it Covid-19? I’ll have to go back and check what the Hezbollah’s Vancouver securities lawyer wrote this month in Dr. Death’s public company’s investor material.
In a million years, I never thought American authorities would allow a Vancouver capital markets guy who helped create the crystal meth epidemic, devastating their people, to keep going in the capital markets, becoming richer by taking even more from Americans by way of their investment capital in his public companies. I was wrong.
I also never thought that you could be tied to financing the Hezbollah and be allowed to run a public company and raise capital from Americans. I was wrong there too.
Let’s switch focus some 4,000 kilometers away to Uganda and Sudan.
On the border of Uganda and Sudan is a terrorist organization called Lord’s Resistance Army (“LRA”).
The LRA has been labelled one of the “most brutal rebel groups,” frequently abducting young children whom it forces into sexual slavery.
The LRA forced an estimated 66,000 children to fight for them, and caused the displacement of over 2,000,000 people.
The leader of the LRA was a man named Joseph Kony.
Joseph Kony has disappeared.
The LRA’s number 2 man, and its chairman and financier was a man named Ladit Balgara.
Ladit Balgara lived in a 10-bedroom mansion in Banstead, England.
In 1998, Balgara was arrested by the UK federal police pursuant to an extradition request from the United States in connection with money laundering charges against him and several others.
He and a British man named Ian Burns were accused of taking millions of dollars from an American municipality which was wired to the Canary Islands, then to Citibank in Spain in an account held by an entity named Lomoro Securities Inc. After that, the money disappeared into the hands of the LRA.
The mysterious Ian Burns lived in Barcelona at the time. He has never been found and is a US fugitive, although it is possible that he is living right in front of us, active in the Canadian capital markets like Dr. Death, denying that he is that Ian Burns.
He could be anywhere – Jersey, Russia, Spain.
Lomoro Securities appears to have been a fictional company although there is now a Lomoro Securities incorporated in the UK operated by Balgara that post-dates these events.
One of the other accused in the case was a man named Gabriel McEnroe, who was tied to the Trafficante Mafia in West Palm Beach, Florida.
In its earlier days, the Trafficante family was recruited by the CIA in West Palm Beach to assassinate Fidel Castro (as described in the book “Mafia Spies: The Inside Story of the CIA, Gangsters, JFK, and Castro”). The plan was foiled because, on the 11th hour, it turns out that the Trafficante boys ended up being pro-Castro. The book describes how a few of those boys were then killed.
McEnroe was apparently a spy too – he disclosed that he was a casual agent for the US government, and provided intel to various agencies about activities in Russia.
In Russia, he worked on oil and gas deals for third parties, similar to Ladit Balgara.
Allegedly, McEnroe had ties to President Vladimir Putin in St. Petersburg, Russia, when Putin was a deputy mayor. Whether that is true or not seems debatable because he would be arrested if he was disclosing that he was providing intel on Russia to the US, while in Russia.
During the time that McEnroe was in St. Petersburg, Russian organized crime was consolidating around key crime leaders who would come to dominate much of commerce in Russia providing so-called “roofing” services. Foreigners and local business people had to work with Russian organized crime to conduct business in Russia.
An exception was George Cohen, the Canadian who brought the McDonald’s restaurants to Russia, whom I knew from thoroughbred horse country in Ontario and the Woodbine racetrack. When he encountered difficulties in Russia, he sought the assistance of Prime Minister Brian Mulroney.
If McEnroe was in Russia doing business at that time, he would have had to have Russian organized crime ties.
It isn’t clear how they all worked together – Burns and Balgara were tied through Lomoro Securities, and Burns was in control of the bank account in Spain used for the LRA. But how McEnroe and the Trafficante Mafia were tied to Ian Burns, Ladit Balgara and the LRA back then is a mystery.
When Balgara was arrested, the UK police issued a news release stating that Ladit Balgara was using the name Powell Onen P’Ojwang in the UK.
He is also a/k/a Paul Onen. I believe he is also a/k/a Powell Cotton, an alleged film director.
In 2002, the US government announced it was dropping charges against Balgara because Balgara told prosecutors that he had “full blown AIDS” and not many more years to live.
Turns out he’s fine, back living in a mansion, and brokering oil and gas deals.
In May 2009, a US government Wikileaks cable stated that Balgara was pursuing destabilizing southern Sudan, and was close to then Sudanese president Omar Hassan Ahmad al-Bashir.
Then in 2011, Ladit Balgara incorporated a company called Global Partners Invest Limited, with a Vancouver man named Mohammed Janif. For what purpose seems unknown. How an African terrorist organization leader formed ties to Vancouver is also unknown.
Balgara’s partner, Sudanese former president al-Bashir, mysteriously disappeared from a Sudanese jail a few weeks ago. Like Joseph Kony. Like Ian Burns.
Al-Bashir could be anywhere – Uganda, London, West Palm Beach.
Some people in the former intel community whom I spoke to about this, believe that a character in the case of Dr. Death and the Hezbollah, and a character in the case of the Lord’s Resistance Army, years later, came to cross-over through the same public company investment scheme.
On March 8, 2023, several news organizations, including the New York Times, published a story emanating from an investigation they say they undertook in which they allege that the Nord Stream pipeline was blown up by six random Ukrainians working from a little sail boat. The story was populated in other newspapers, including The Guardianhere.
The story is ludicrous.
The theory of the story goes something like this:
Once upon a time on the German island of Rugen, five men and a woman, dressed in sailor’s clothing, rented a little sail boat called Andromeda. It was the beginning of September, and the weather was rainy, cloudy and cold.
The six bad actors were seen carrying food and water in shopping bags aboard the little sailboat. They then boarded and sailed away to the island of Christiansø in Denmark.
One of them used a fake passport; the other five did not (which has to mean the identity of 5 of the alleged bad actors is known).
Around September 23, 2022, they left Christiansø, and sailed to the precise spot where the Nord Stream 2 pipes lay on the seabed floor, some 260 feet below in the black cold Baltic Sea.
They threw the anchor overboard knowing, as all sailors do, that the 2,000 foot rope radius tied to the anchor would be a problem, shifting the little boat’s location continually within the rope radius, as the boat bobbed on the waves. This meant that the boat would be at a different place when they came to the surface.
They jumped in the water, with hundreds of kilograms of C4 explosives. Already we know that they are superhuman to be able to carry such weight overboard. They turned on their recreational helmet lights, and dove down 260 feet down in record time. When they reached the seabed, without the use of any buoyancy aides, or lift bags, they were miraculously able to carry, move and hold the hundreds of kilograms of C4 to fasten it to the cement-encased pipes.
With what, string?
After each day’s work, they zoomed up to the surface.
They did this for four days straight, for about 9 hours a day factoring in ascension time, without one intelligence agency, passenger boat, coast guard, surveillance air craft or satellite intel operator seeing them.
Being impliedly superhuman unlike the rest of us, they didn’t need nitrogen in their tanks, didn’t have to contend with deep sea pressure problems and equalize the air pressure on the decent or ascent, and didn’t need or have a decompression chamber.
By September 26, 2022, their mission was accomplished.
The bad actors finished the last bit of work on the seabed floor, tying the C4 to the pipes, came up to the surface with no equalization problems whatsoever, pulled up anchor, and hurriedly motored away, detonating the C4 as they left.
Diving below 150 feet requires humans to use mixed gas, and ergo the operation must have been a saturation dive.
With sat diving, the divers live in a pressure chamber, pressurized to the depth of the seabed of the Baltic Sea. Any scuba diver going down in recreational gear without special equipment and air supply, as the story implies, would be incapacitated or dead when they reach a depth of 260 feet, and if they were not dead, they would be unable to come back to surface alive, and if they did, they would have a life-threatening case of the bends.
In a sat dive, the divers go from a sat chamber to a diving bell which is lowered to the working depth. They then leave the bell and perform their tasks, while attached to the bell through a series of umbilical cords that deliver gas to the divers, hot water (to keep divers from freezing to death) and electricity, and which provide video and audio capabilities to communicate and which sends back real-time video footage of the divers’ work.
Divers can work for about five to six hours in such conditions and once they have finished working, they enter the bell and are brought back up to the sat chamber. They live in the sat chamber and must remain there until depression is over. For 260 feet, human decompression takes at least 3 days.
The divers who went down to the Nord Stream 2 pipeline to blow it up, needed to have a whole team of special technologists and life support technicians whose job was to provide the right gas mixture to them at all times, to monitor pressure and to keep them alive. There would have also been a communications team on-site to deal with audio and video communications so that the team on the ship could give instructions and directions to the divers working below.
The work of sat divers is incredibly hazardous, arduous, and mentally and physically challenging. If that work involves dealing with explosives on the seabed floor, its exponentially more dangerous. There aren’t that many people in the world who are qualified to do this work, and bearing in mind that they probably belong to PADI, and other elite social deepsea diving groups, the candidate pool is small.
According to the New York Times, they are Ukrainian and one of those elite divers is a woman.
If that is to be believed, de-cloaking the identity of the alleged six Ukrainian elite sat-experienced deepsea divers who blew up Nord Stream 2 should take a journalist or investigator about 2 hours to figure out. It’s super simple, right? Find 6 Ukrainians, one a woman, who are certified in advanced deepsea diving who have enough hours clocked and enough experience in sat dives with knowledge of explosives to pull it off.
But there is an smaller pool of people involved than the pool of elite deepsea divers and it’s the life support technicians – the gas experts – who keep deepsea divers alive. Its super simple, right? Find a team of educated, qualified, experienced life-support technicians for sat dives in Ukraine, and you’ve found the bombers.
Regardless of who blew up Nord Stream 2, the most important thing to keep in mind is this – because the operation had to be a sat dive, the entire deepsea operation was filmed, and the footage is storied in several places.
YBM was Canada’s Wirecard 30 years ago. It remains one of the most surreal criminal cases
30 years ago this month, in February 1993, Russian organized crime leaders set a plan in motion to infiltrate Western capital markets, steal investor funds and launder money.
The Russian organized crime group was the Solntsevskaya, and they had billions to launder from weapons trafficking, human trafficking, narcotics trafficking, prostitution, theft, and extortion.
Key leaders of the Solntsevskaya who came together for the con were Semion Mogilevich, Viktor Averin, Arnosha Tamm, and Sergei Mikhailov. They were joined by Mogilevich’s financier, Igor Fisherman and a Mogilevich associate, Jacob Bogatin.
Mogilevich was by now in Hungary, at the behest of Yevgeny Primakov. Under the plan, Mogilevich would set up and become the control person of a new public company and it would be in the rare earth elements sector, fictitiously manufacturing permanent magnets made of neodymium.
And the customers? No problem, they would make them up.
And the lawyers? No problem, many came forward to provide legal advice and to bill doubly as directors, including former Ontario premier David Peterson.
The one remaining issue – whose capital markets to infiltrate?
Russian organized crime decided Canada was the ideal place because of the no barriers to entry.
And so the plan was set in motion.
In February 1993, Mogilevich wired US$100,000 in dirty money from his UK based money laundering front company, Arigon Co. Ltd., to Jacob Bogatin in the US to start the process.
In January 1994, Mogilevich wired more money to Bogatin to hire attorneys in Canada. Bogatin then wired some of Mogilevich’s dirty money to the trust account of a Calgary law firm. On March 16, 1994, Mogilevich’s attorney in Calgary registered a company for him in Alberta called Pratecs Technologies Inc. Between March and July, Mogilevich and his attorneys in Alberta worked on Pratecs to be approved as a capital pool company and once approved, the company then sold 4 million shares to investors.
In July, it merged with YBM Magnex Inc. and several members of the Solntsevskaya Russian organized crime group, including Mogilevich, Semion Ifraimov, Alexandr Alexandrov, Alexei Alexandrov and Anatoly Kulachenko, received 18 million shares of the new entity, YBM Magnex International Inc. (“YBM”). That transaction made them collectively the control person of the issuer, controlling 80% of the issued and outstanding stock of YBM Magnex International Inc.
Russian organized crime now controlled YBM and they had infiltrated the capital markets.
YBM acquired Arbat International Inc. (Mogilevich’s Moscow company), and Arigon (controlled by Mogilevich and Viktor Averin), which became subsidiaries. This suggests that Mogilevich was more confident than he should have been about the extent to which the FBI and RCMP were monitoring the Solntsevskaya. Arigon and Arbat were two of the Solntsevskaya’s main money laundering fronts, and they became more exposed by being enveloped into a North American company.
In April 1995, the FBI applied for a secret order to intercept and record phone conversations of the Solntsevskaya in New York. In support of the application, the FBI swore an affidavit (the “FBI Affidavit”) which described the members of the Solntsevskaya as including Vyacheslav Kirillovich Ivankov (“Yapochik”), Mogilevich, Sergei Mikhailov, Viktor Averin and Arnosha Tamm, and described how Arbat was used by Arnosha Tamm to wire large sums to Mogilevich in Hungary. It also described the extensive organized criminal activities of the Solntsevskaya, and identified Yaponchik as the Godfather of the Russian mob in the US.
On May 16, 1995, the British police raided the London law firm that represented Arigon after an investigation showed that more than $50 million in Mogilevich’s proceeds of crime were washed through the law firm’s trust account.
Two London attorneys, Peter Blake-Turner and Adrian Churchward were arrested. The police also raided the homes of the two attorneys. The police seized Arigon’s corporate records which showed that the owners of the YBM entity, Arigon, were Russian organized crime leaders Mogilevich, Semion Ifraimov, Alexandr Alexandrov, Alexei Alexandrov and Anatoly Kulachenko. The police alleged that Russia organized crime was laundering money through YBM’s entities Arbat and Arigon.
You may be wondering why these two attorneys? They worked at the same firm, and the spouse of Churchward was the Russian former girl friend of Mogilevich. The attorneys were not prosecuted because they had no knowledge that Mogilevich was Russian organized crime.
In the meantime, the FBI and UK police were investigating two London-based Russian bankers who were washing billions of dollars for Mogilevich and for Cali drug trafficking cartel leaders through an entity named Benex International Company Inc., although this investigation would not be made public until 1999. Benex was a fake supplier to YBM on paper but in actuality, it was a nominee shell with a valuable US bank account used to launder dirty money.
When the arrest of Arigon’s attorneys in London made the news, YBM issued a news release, and lied, stating that Arigon was not tied to YBM.
In June 1995, an asset freeze application in the UK courts was filed against the YBM entity Arigon, and Mogilevich, on the basis that their assets were from Russian organized criminal activities. The government obtained a worldwide injunction.
On June 27, 1995, Bogatin complained to YMB and Arigon’s attorney in London that the injunction was having a devastating impact on YBM, causing a suspension of its public offering of securities in Toronto. No disclosure of this was made to investors.
Then suddenly, in July 1995, the UK proceeding against Arigon and Mogilevich magically ended when a law enforcement officer changed his evidence against them.
When the London case ended, the issuer ramped up efforts to raise money from Canadian investors. By now, YBM and its attorneys understood Mogilevich was Russian organized crime, and he was laundering money through the YBM subsidiaries and controlled their bank accounts – they clearly understood this because of the UK proceeding.
On October 5, 1995, YBM closed a private placement for gross proceeds of $14 million. In the offering of securities, it represented to investors that, at the end of 1992, it had revenues of $17.7 million, net income of $2.5 million, and 133 employees. It was completely not true. YBM did not disclose to investors what was true – that it was a Russian organized crime-controlled company in Canada.
Ten days later, YBM issued a news release, falsely claiming to investors that it had sales it did not have.
A red flag about YBM was its allegation that it was in the rare earth elements business, and the lack of disclosure about rare earth manufacturing. During this period of time, China was restricting rare earth exports and suspending domestic mining licences as it began a process of stopping illegal mining and centralizing mining permitting for rare earth elements. If YBM was making neodymium magnets, there would have been disclosure about the process of acquiring rare earth elements from China, supply chains, and of manufacturing neodymium magnets, and the attendant risks of those activities, including the risks of the suspension of licences from China and its environment liability risks from manufacturing.
Even though YBM’s business was an illusion with known Russian organized crime figures linked to it, in January 1996, it was approved to be a reporting issuer in Canada.
When it became a reporting issuer, the directors and officers were Harry Antes, Jacob Bogatin, Kenneth Davies, Igor Fisherman, Frank Greenwold, R. Owen Mitchell, former Ontario premier David Peterson, Michael Schmidt and Daniel Gatti.
Former Ontario premier, David Peterson, was YBM’s securities attorneys, as was an attorney named Lawrence D. Wilder.
According to the US Department of Justice, the YBM directors were directed and controlled by Mogilevich and Fisherman.
Then, in early 1996, things at YBM took an unexpected turn. Since 1994, the RCMP had been intercepting the calls of Vyacheslav Sliva, the brother-in-law of the Godfather Yaponchik, who lives in Toronto, and was sharing that intel with the FBI. They were aware that Mogilevich came to Toronto using an Israeli passport under a fake name in December 1995, to chill with YBM’s team.
In January 1996, two associates of Mogilevich in Hungary applied for a visa to enter the US for YBM business. The visas were denied on the basis that YBM engaged in unlawful activities. YBM hired a US attorney to challenge the visa denials. It is doubtful that they truly wanted to pursue the matter of having the employees travel to the US; more likely, Mogilevich wanted to know what the US government knew about his activities. He would have been worried about the Benex entity tied to YBM because it was being used to move billions of dollars through the Bank of New York. Politicians, the Department of Justice, the State Department and the FBI were all contacted by YBM for information.
When information from US authorities was not sufficiently forthcoming to YBM, it is possible that Mogilevich got spooked because in April, he transferred Arigon to a YBM related Cayman Islands entity and took back Arbat.
On March 7, 1996, YBM’s stock began trading on the Toronto Stock Exchange.
In August 1996, the directors, and officers of YBM were given an update on the visa denials and were told simply that the US government was investigating YBM. They formed a committee to investigate areas of concern stemming from the visa denials – but recollect that YBM knew, from the UK case, that Mogilevich was its control person and was Russian organized crime.
By this time, the FBI had conducted surveillance of YBM’s HQ in Pennsylvania and had determined that the so-called HQ was not capable of supporting the 165 employees, or $20 million in sales that YBM claimed in its disclosure to investors.
In August 1996, the FBI issued a report on Mogilevich’s Russian organized crime group, which included Viktor Averin and Sergei Mikhailov. It described the principal activities of Mogilevich as weapons trafficking, nuclear materials trafficking, prostitution, drug trafficking, dealing in precious gems and money laundering using, among others, Arigon as a front company, and described YBM as a Mogilevich company.
On November 1, 1996, YBM retained Fairfax Group to dig in and investigate the US government’s investigation.
In mid-December 1996, YBM obtained a copy of the FBI Affidavit, and given its content, by now there was no doubt at YBM as to Mogilevich being Russian organized crime. The directors decided to prepare a questionnaire for the mobsters controlling the issuer, in effect their bosses, for them to answer. In the communication to the mobsters attaching the questionnaire, they acknowledged having read the FBI Affidavit and stated that their job was to determine if the statements in the FBI Affidavit were true. They knew the statements were true from the UK case.
They wrote this to the mobsters: “our securities lawyers tell us that we are very close to having an obligation to disclose these allegations to the general public. If this were to happen, our stock would be worthless in a short period of time.”
In fact, the obligation to disclose had arisen a year earlier but the directors were also shareholders and, as they knew, the stock would be worthless if they made a truthful disclosure to investors.
In March 1997, Fairfax gave an oral briefing to YBM and its securities attorney Lawrence Wilder on its findings. It reported that certain of its insiders and shareholders namely, Mogilevich, Anatoly Kulachenko, Semion Iframov, Alexandr Alexandrov and Alexei Alexandrov, were linked to the Solntsevskaya. Fairfax reported that those Russian organized crime figures controlled YBM, Arbat and Arigon, certain YBM records were falsified, YBM was doing business with companies that did not exist, were shell companies or were controlled by Mogilevich, and that Sergei Mikhailov, Viktor Averin and Arnosha Tamm had received money from YBM or its entities.
Fairfax also reported that the Solntsevskaya shareholders of YBM exerted considerable influence over the issuer, and there was indicia of money laundering in its operations.
Fairfax recommended that YBM directors cooperate with the US government. They refused.
At one of the Fairfax briefings, a director noted that if it became known that YBM had Russian organized crime figures as shareholders, the stock would have very little value.
Again, the fixation was on share price and obfuscating the true picture of the issuer, rather than on disclosure of material information to investors, as required by securities law.
On April 7, 1997, YBM’s securities attorneys published the MD&A, annual report, and financials on Sedar. The MD&A alleged that, in 1996, YBM had net sales of $90.3 million, a 79% increase over 1995, and that it was producing rare earth magnets. The annual report stated it had 536 employees and was making 110 tons of rare earth magnets that were sold in 23 countries. It was untrue.
On May 2, 1997, YBM’s securities attorneys published the AIF on Sedar. It contained no disclosure of Mogilevich, Viktor Averin, Arnosha Tamm, the Solntsevskaya shareholders, the front companies, the money laundering, or the investigation by Fairfax except, way under business risks, it stated that over the past two years, it had “became aware of concerns expressed in the media and by government authorities generally concerning companies doing business in Eastern Europe.”
That was it – that one sentence was the extent of YBM’s disclosure of the Fairfax findings.
On June 1997, YBM’s prospectus was accepted for filing despite that its business was still illusory.
On August 21, 1997, YBM closed a private placement for gross proceeds of $48 million based on the prospectus.
Things continued this way for another eight months until it was time for the annual financial statements to be prepared and audited by a new auditor, Deloitte LLP, for the year ended 1997.
In March 1998, Deloitte met with YBM and its Toronto securities attorneys and expressed concerns regarding certain YBM business partners. Deloitte also questioned approximately $160 million in alleged business transactions of YBM.
In response to Deloitte questioning transactions, a director admitted that certain YBM transactions, among other things, “created a condition where money can move in a circle” – e.g., round-tripping. Round-tripping means money that goes around and ends up at the same place but deceptively, so that it appears that new money comes in, when it’s the same money that re-enters an issuer.
In April 1998, Deloitte then raised more concerns with YBM, when it learned that Russian organized crime did business with YBM.
Deloitte suspended its audit of YBM’s financial statements and told YBM and its securities lawyers to disclose to investors that the audit was suspended, as required by securities law.
And this is pretty wild – they refused.
On May 13, 1998, the FBI and INS executed a search warrant at the office of YBM in Pennsylvania. They seized share certificates of YBM that showed Russian organized crime figures Mogilevich, Semion Ifraimov, Alexandr Alexandrov and Alexei Alexandrov were shareholders of the issuer.
YBM’s stock was cease-traded.
YBM then issued a news release alleging that it had received a report confirming no evidence of criminal activity was found at YBM.
A week later, Bogatin gave an interview to the Village Voice and admitted that Mogilevich “owns” YBM. The Village Voice article was the first media deep exposé on Mogilevich and his organized crime empire in the West.
The FBI was still intercepting calls. In one of those interceptions, it learned that Mogilevich had ordered a hit on the journalist for US$100,000. The FBI recommended the journalist get out of New York City.
On June 2, 1998, Deloitte resigned as auditor and refused to certify the audited financial statements for the year ended 1997.
By then, the issuer was finished. As the directors had noted a year earlier, the stock of a public company run by organized crime was worthless.
In 1999, YBM pled guilty in US federal court to securities fraud, admitting that it had created and disseminated false and misleading disclosure to investors, and fraudulent financial statements from 1993 to 1998.
In 2007, the US indicted certain defendants, including Mogilevich, Bogatin and Fisherman for securities fraud.
Nothing happened in Canada regarding prosecution for securities fraud.
But on the civil side, at least five lawsuits were filed by Deloitte and by investors against the Toronto securities lawyers, brokers, underwriters, the issuer and its directors. The lawsuits settled for $120 million, which was paid in part by the lawyer regulator’s insurance.
A Canadian securities regulatory action was commenced on several narrow issues of failures of disclosure in which the two securities attorneys were defendants, which found that because there was external evidence of organized crime in the issuer from a qualified intelligence firm, that information was required to be disclosed to investors.
In addition to being sued in the many civil litigation cases, one of the YBM securities attorneys, Lawrence Wilder, ran into difficulty after a regulator said he made untrue and misleading statements during the YBM investigation. That case was settled.
Primakov, who was now the Russian Minister of Foreign Affairs, pulled Mogilevich out of Hungary and back to Moscow. Mogilevich continued to build his empire in Ukraine and Moscow. He is now on the FBI’s Most Wanted List, and was part of the Netflix show “World’s Most Wanted.”
Perhaps as a foreshadowing of events to come 30 years later, author Bruce Livesey in connection with the YBM case and the infiltration of organized crime in the Canadian capital markets, wrote:
“In British Columbia, the Hells Angels have a track record of laundering money through publicly traded companies in Vancouver and of using lawyers to help set up such companies.”
One can fast forward to today and query whether anything has changed – the SEC is currently alleging that 100 public companies controlled from Vancouver were frauds; a handful were headed by the Hells Angels using companies.
And if we look further beyond Canada, there is the Wirecard fraud in Germany – a replica of the YBM fraud on a much grander scale, where funds were round-tripped around the world to camouflage the fact that much of its business was illusory.
(1) Mogilevich was moved to Hungary with agent Shabtai Kalmanovich under the sponsorship of Yevgeny Primakov, the then-head of the KGB who obtained the release of Kalmanovich from an Israeli prison to take the Solntsevskaya global. The Hungary group is what is sometimes called the“Mogilevich Russian organized crime group”. It was not an organization, per se, but rather a group established by Primakov for international activities for some members of the Solntsevskaya. To teach Mogilevich the ropes and clean him up, Kalmanovich was brought in. He instructed Mogilevich on how to run a sophisticated underground international organized crime operation and move money undetected. The involvement of Kalmanovich had another purpose – Primokov trusted almost no one else. The idea that Mogilevich was a criminal mastermind is inaccurate. The mastermind was Primakov; his prime student (agent) was Kalmanovich..
(2) A duty to warn arises when law enforcement receives information that is credible about a death threat to a civilian – often the threat is from organized crime and is received from intercepted calls.
Canada is racing to become a mining superpower but will its investments be enough?
Clean Tech Energy Transition
Late in 2022, Canada announced a series of new strategies aimed at re-igniting the domestic mining industry for rare earth elements (REEs) and critical minerals needed for the energy transition from fossil fuels to renewable energy and the clean tech powering it. Batteries and magnets, including for electric vehicles (EVs), are key outputs of these minerals for clean tech.
To get to net zero, renewable energy capacity must be tripled and to achieve that, manufacturers globally need 500% more of some of these minerals.
REEs and critical minerals are a finite resource, and while there is a relative abundance of such minerals on Earth now, there is not enough mining or refining capacity to meet demand.
China dominates REE and most critical mineral refining, as well as REE extraction, and is the largest consumer of REEs and critical minerals. The second largest consumer, the US, is transitioning away from buying refined REEs and critical minerals from China due to US geo-political concerns. Canada hopes to fill the vacuum by being the key supplier to the US.
According to the US critical minerals list, the US is most dependant upon China and Canada for minerals. In addition to REEs and refined critical minerals, it relies upon China for arsenic, fluorspar, gallium, graphite, scandium and bismuth. It relies on Canada for refined aluminum (although it owns the aluminum refineries in Canada), potash, uranium, rubidium, niobium and cesium.
Demand from countries working to build clean tech to meet net zero goals and from the US voluntarily cutting off supply from China, has set off a global mining race for mineral sovereignty to secure future supplies.
Rare Earth Elements and Critical Minerals
There are 17 REEs, such as lanthanum, cerium, promethium, terbium, and neodymium. Although referred to as “rare”, most REEs are widely available and some are more common than cooper or lead. All REEs except promethium, are more abundant than gold or silver.
Their rarity stems from the fact that REEs are found in low concentrations in other minerals. The extraction, isolation, processing and purification of them, therefore, is costly, time and resource intensive, and wasteful. For example, it takes 1kg of extracted iron to get 1 gram of refined neodymium. It’s like extracting one T-bone steak from each cattle in a herd, and throwing the rest away.
Critical minerals are not the same thing as REEs, although Canada has put them together in its 2021 list of critical minerals because the demand for REEs is critical. A mineral can be critical to one country and not to another. Lithium, for example, is critical to Canada but not to Australia or Argentina. Typical critical minerals include cobalt, zinc, aluminum and copper.
Countless products are made using REEs or critical minerals, and in some cases, both. They include AirPods, batteries, permanent magnets, disk drives, EVs, flatscreen monitors, vehicles, glass, wind power turbines, camera lenses, satellites, weapons, MRIs, and some cancer drugs.
The exploration, extraction and refining of REEs is relatively new, having occurred only in the past 100 years.
Until a year ago, there was only one REE mine in the Western Hemisphere – in California – which was called Mountain Pass. It filed for bankruptcy in 2015, and recently completed a business combination to re-open its facilities. Australia has one REE mine for light atomic weight REEs, but sends the raw product overseas for refining.
Only China currently extracts and refines valuable heavy atomic weight REEs.
Canada does not extract REEs, and has one refining facility. However, there is an abundance of known REEs in Canada, particularly along the old mining route from Seven Islands to Ungava Bay. In the late 1940s and into mid-1950s, a significant amount of exploration was completed in the region (see below), which was abandoned.
With critical minerals, it’s a different story. For that, we look to Canadian mining history – specifically, 1957.
By 1957, Canada was mining 30% of the critical minerals on its strategic minerals list. In the intervening years, however, critical mineral mining slowed in Canada.
In 1957, Canada was the world’s 2nd largest producer of cobalt, a key battery mineral. Now it ranks 8th, with negligible output compared to the Democratic Republic of the Congo, which has 70% of the extraction market. By 2030, the cobalt market is expected to be US$19 billion. China dominates processing and refining of extracted cobalt.
A similar story emerges with nickel. In 1957, Canada was the world’s #1 producer, with 60% of the global market. Canada now has only 6.7% of the market. Indonesia emerged from nowhere, historically speaking, and is on a path to be a leader in nickel extraction and refining. By 2030, the nickel market is expected to be US$59 billion.
In 1957, Canada was the world’s 2nd largest producer of zinc, with 12.9% of the global market – it now has 1.5% of the market, and ranks 11th behind China, Peru and Mexico. Projections vary widely but by 2030, the global market for zinc is expected to be over US$100 billion.
Those key minerals, once mined in Canada, are now mined in other countries that have social, political, or environmental concerns.
In Indonesia and the Philippines, laterite mining of nickel takes place adjacent to rain forests, parts of which are being destroyed.
Mexico and Peru, which licence zinc mines, have pervasive rule of law, corruption, bribery, organized crime and money laundering issues. Peru is in absolute chaos, with more than one new president in office every year since 2018. There have been daily protests and demonstrations against the government for months.
The quest for cobalt is no better – the Democratic Republic of the Congo has over 130 armed groups battling for territory, including ISIS. While the DRC has modern mining operations, it also has unlicensed mining operations run by local war lords, some by terrorist groups, where cobalt is extracted from rough pits or in narrow underground earth tunnels. The tunnel mines have no electricity, water or ventilation. In the unlicensed mining operations, women, men and allegedly little children, work up to 12 hours a day for a pittance.
Transparency in mining supply chains remain elusive and whether critical minerals in your iPhone or Tesla derive from the fruits of child labour, or whose extraction destroys rain forests, or funds ISIS or Mexican cartels trafficking fentanyl to Vancouver, is anyone’s guess.
The CCZ and EEZs
Mining activities shaded by child labour, corruption, civil unrest or rain forest destruction have compelled some investors to look for alternatives in a deep-sea area called the Clarion-Clipperton Zone (CCZ) in the Pacific Ocean.
The CCZ, an area larger than India, has grapefruit-sized polymetallic nodules resting on the seabed floor that formed over millions of years. The nodules contain cobalt, nickel, copper and manganese. Not just that – the CCZ has three times more cobalt, nickel and manganese than terrestrial sources combined. And unlike traditional mining, nodules are vacuumed from the seabed floor.
The foremost legal scholar in this area, the late UBC law professor Ian Townsend-Gault (my former law professor), played a significant role in the UN Law of the Sea Convention, marine jurisdiction over the South China Sea, and deep-sea natural resource exploration and exploitation rights, including in the CCZ, an area covered by the Convention.
Importantly, Canada is a signatory to the Convention but not the US. Because Canada is a signatory, and the US is not, American companies cannot pursue a license to explore or exploit the CCZ for critical minerals. British Columbia companies can.
And indeed, a British Columbia company, TMC The Mineral Company, is at the forefront of CCZ mineral exploration – in November, it vacuumed 4,500 tons of polymetallic nodules from the CCZ seabed floor as part of a pilot.
The CCZ is not the only deep-sea mineral resource area relevant to British Columbia.
The EEZ off British Columbia has deposits of polymetallic sulphide, which contain copper and zinc, and it also includes part of the cobalt-rich ferromanganese crust, which contain cobalt, nickel, manganese, molybdenum, tellurium, platinum, vanadium and some REEs.
The EEZ off Canada’s Arctic coast also has these rich mineral formations.
Deposits within Canada’s EEZ fall outside of the jurisdiction of the Convention and potential mineral exploration or exploitation therein is up to the federal government of Canada.
It sounds enticing – being able to collect valuable minerals without terrestrial mining concerns – except that no one knows what harm deep-sea mining on the seabed floor in the International CCZ or national EEZ will cause to the ocean, marine life, the environment or to us.
The most authoritative and best NGO voice out there is Mining Watch – it has an excellent report here in respect of the risks to deep-sea mining in the CCZ.
Canada is being asked to ban deep-sea mining in its EEZs but it is very unlikely to do so. For one thing, it’s inconsistent with the new federal strategy for Canada to become a new mining superpower; and it would be geo-politically harmful because, with the US a non-party to the Convention, Canada’s key oceanic leadership voice in the world would be diminished.
Pressure against deep-sea mining is certain to increase in the months and years to come and such pressure raises the decades-old mining dilemma – namely, if Canada walks away from the deep-sea mining, who are we leaving it to?
We should look no further than the illegal cobalt mining activities taking place in the Congo with child labour and terrorist groups taking larger pieces of the mining pie by force and extortion, to convince us that the mining sector is stronger with Canadian companies in it, than out of it.
Mining Industry Investment
With increasing global demand for REEs and critical minerals, the Canadian government is investing in helping mines get built and to improve refining capacity.
A major impediment on the build side is the mining regulatory process.
It takes a commercially unreasonable amount of time – an average of 13 years – for a mine to be approved or rejected in British Columbia, which may explain why there are only 17 active mines in the province. In contrast, Ontario has 41 active mines.
Canada has significant FDI competition from the US Government, which is offering US$370 billion in grants and subsidies to local and foreign companies to relocate to the US and help America build its clean tech industry, and ramp up mining.
According to the French Government, the US perks are so generous, parts of Europe’s high tech manufacturing sector that is innovating in EVs, mineral recycling, and clean tech, is relocating to the US. The EU is contemplating its own €380 billion subsidy package to keep innovation in Europe.
All of these subsidies and grants are a welcome boost for clean tech innovation but expire in a few years. As a result, they may have little overall impact on competition with China because it has had a long head start and built innovation systems tied to university R&D programs into downstream products supply chains.
Unless we adopt a similar approach to China and commit to long-term support for the mining sector to bring it back to its 1957 global rankings, we will struggle with mineral sovereignty and may lose the opportunity to prosper in a decarbonized economy.
Gill lives in Canada and is a/k/a Arsh Dala, a/k/a Arsh Dalla.
The Ministry of Home Affairs (MHA), which published the designation on January 9, 2023 in the Gazette of India, states that Gill is associated with the Canadian extremist organization Khalistan Tiger Force (KTF).
The MHA states that Gill engages in terrorist financing [from Canada, presumably, where he is located] using hawalas, and has committed murder, extortion for terrorist financing, and engages in cross-border smuggling of drugs and weapons.
According to the MHA, Gill operates terrorist modules for Hardeep Singh Nijjar (Nijjar), a Canadian who was listed as a terrorist by India in 2020.
Two weeks after Gill was listed as a terrorist, his brother Baldeep Singh Dalla allegedly fled to Canada using a fake passport. He is alleged to have ran terrorist operations at the direction of his brother.
The KTF is not a designated terrorist organization, according to terrorist lists in Canada and India, although its related entity, Babbar Khalsa International (BKI), is a listed terrorist organization in Canada and in India.
KTF and BKI seek an independent Sikh state to be called “Khalistan” from India, and have engaged in armed attacks against critical infrastructure and public property for ideological purposes.
Gill’s associate Nijjar is alleged to be the leader of the KTF. According to an interview with TV Punjab in Vancouver, Nijjar said he is not a Canadian terrorist. Nijjar is alleged to have set up an arms training camp in Mission Hill, a small town in British Columbia, Canada, which he denied in a news report here.
Nijjar’s designation as a terrorist by India came at the same time as the terrorist designation of lawyer Gurpatwant Singh Pannun, a New York called lawyer but who is said to be in Canada, practicing law in British Columbia. Among other legal cases in British Columbia that he conducts is acting for Nijjar in Vancouver. Pannun is a Khalistani separatist. India alleges that he is an associate of BKI terrorists, and involved in terrorism. He is on India’s most wanted list but Interpol refused to list him.
Pannun he has not been convicted.
The terrorist group BKI was formed by Sukhdev Singh Babbar and Talwinder Singh Parmar. Its first branch was set up in Vancouver in 1981. The former leader of BKI, Jagtar Singh Tara, founded KTF.
1985 Canadian terrorist attack
Talwinder Singh Parmar is well-known to Canadians. He was the Vancouver mastermind behind the 1985 Air India terrorist attack that killed 329 people, including 280 Canadians. After the terrorist attack, he fled to Pakistan, and then India where he was killed by the Punjab police in October 1992.
Jagtar Singh Tara was prosecuted for a 1995 suicide bomb attack that killed several people, including the chief minister of Punjab, Beant Singh. He is currently incarcerated in New Delhi.
Sukhdev Singh Babbar was killed in 1992 in the Punjab.
Indian intelligence says that BKI is funded by hawalas and NGOs in Canada.
Extradition sought by India
India is seeking the extradition of Gill, Nijjar and the lawyer Pannun, and may seek the removal of Dalla on identity theft and misrepresentation grounds tied to his entry into Canada using an alleged false passport.
Terrorist financing is a money laundering predicate offence and the removal of Gill and Nijjar from Canada could include money laundering allegations.
Ontario member of parliament Deepak Anand, and Ujjal Dosanjh, a former British Columbia premier and federal cabinet minister, stand out as two politicians in Canada who have objected to the celebration of terrorist figures like Parmar.
This is not a story but a potpourri of interesting events involving bribery, extortion, attempted murder, banking, Russian organized crime, Oligarchs and Canada.
We start with Russian Oligarch Vladimir Ivanovich Yakunin (Владимир Иванович Якунин), a high level politically exposed person.
Yakunin was a former KGB agent and Soviet ballistic missile specialist, before becoming president and chairman of the state-owned Russian Railways from 2005 to 2015. He is currently sanctioned by the United States. Among the many mansions that Yakunin owns, people say one is allegedly near Russian President Putin, although that seems doubtful.
Drones over Norway
Yakunin was recently in the news because it is his son, Andrei Yakunin, who was the Russian nationalarrested in Norway’s Svalbard area in the high Arctic, and charged with flying drones around restricted infrastructure in the country, a charge of which he was later acquitted.
The assumption was he’s a spy, who was using drones to gather granular intel for Russia. He says he was on a holiday sailing trip and just wanted to fly drones.
Yakunin’s wife ‘saved’ by the Russian mob
Before the appointment of Vladimir Yakunin at the helm of Russia’s largest utility company, Russian Railways, his wife Natalia Yakunin (Наталья Якунин), was kidnapped.
A Russian named Andrey Krapivin (Крапивин Андрей Викторович Источник), was called upon to negotiate her release with Viktor Averin (Виктор Аверин), one of the leaders of the Russian organized crime group Solntsevskaya (Солнцевская). Averin and the Solntsevskaya were tied to Canada’s capital markets. We’ll get to that later. Krapivin and Averin heroically secured Natalia’s release from captivity, and legend is, they killed the kidnappers.
When you owe the Russian mob
Yakunin was now in the debt of the Solntsevskaya and Krapivin. That debt was allegedly re-paid in recurring contracts from Russian Railways to Krapivin’s private companies, KUM LLC (КУМ OOO) and the 1520 Group.
The website of the 1520 Group is here — they make, coincidentally, industrial drones to take photographic evidence.
Entities set up to collect the debt
The second entity, KUM LLC, is an acronym of the last names of Krapivin, Boris Efimovich Usherovich, (Ушерович Борис Ефимович) and Valery Anatolyevich Markelov (Маркелов Валерий Анатольевич).
The Instagram account of the former girlfriend of Markelov is here. She leads a very Oligarch sponsored life.
She used to travel the world on private jets, favouring the US, Italy and Turkey.
Markelov, although connected to Russian organized crime boss Averin (and Russian organized crime boss Simeon Mogilevich), allegedly had a deal in Canada with Bombardier to be its middleman (see here). Averin and Mogilevich are childhood friends and “vory v zakone” – thieves in law.
Markelov’s daughter, who uses the name Kristina Orsa, sings on YouTube here, and does a Fashion TV stint here.
Russian mob banks
Back to Krapivin, Usherovich and Markelov.
They owned at least two Russian banks with a Russian Oligarch named German Gorbuntsov. Those banks were Interprogressbank (Интерпрогресс банк) and Capital Trade Bank (Столичный торговый банк). Gorbuntsov also owned Interusbank (Интерусбанка) and Industrial Credit Bank (Индустриальный кредит банка).
Gorbuntsov was known in Russia as a “black banker”, which means a banker you go to to launder large sums of money or if you are part of major organized crime. The Solntsevskaya was one of its customers.
Much of the information in this potpourri is taken from an affidavit sworn by Gorbuntsov in 2017, for a litigation he is pursuing in Russia, available on the website of Русский Криминал.
$3 billion and counting
KUM LLC set up numerous shell companies in Cyprus, such as Rogenial Limited, to conduct business with Russian Railways. While payments were made to the KUM LLC shell entities, no services were rendered to the Russian government-owned utility.
By 2005, Gorbuntsov says he was told by the KUM partners that they had over US$3 billion in shells outside Russia, primarily acquired by payments from Russian Railways.
Markelov managed KUM LLC’s deal with Russian Railways. He built relationships with federal employees in the infrastructure, procurement, real estate and building divisions, paying employees bribes or threatening them with harm or blackmail, to ensure KUM LLC was awarded contracts and paid, whether the work was done or not. Often, trade-based money laundering was used whereby fictitious invoices were submitted so that KUM LLC could get paid.
Blackmail and extortion
In order to keep prosecutors at bay, KUM LLC blackmailed local prosecutors, allegedly paying a Moscow prosecutor US$10,000 per month to serve their interests, after setting him up with a sexual encounter with an underage girl at a Russian bathhouse. The encounter was recorded, and after that, the prosecutor became indebted to KUM LLC.
The role of Usherovich was to bring federal law enforcement agencies on board to support the activities of KUM LLC across Russia. If there was a property or a business the KUM LLC wanted, Usherovich brought in muscle from the Solntsevskaya and federal law enforcement officers on payroll, to forcibly take over the land, assets or business from the owners.
KUM LLC acquired business assets at discounted prices or for free, through threats and intimidation. Usherovich allegedly boasted to Gorbuntsov that KUM LLC acquired a whole block of industrial buildings, including manufacturing plants and a construction company by forcing its owners to sign ownership over to them using Russian federal law enforcement officers.
Police krysha services
One such federal law enforcement officer was Sergey Stanislavovich Derevyanko (Сергей Станиславович Деревянко). He held senior positions at the GUSB of the Ministry of Internal Affairs and the GU MVD for the Central Federal District. He provided krysha services to the KUM LLC.
Krysha, which means a roof, is protection money paid to organized crime, law enforcement or corrupt government officials to operate a business. In its simplest terms, they provide a roof over your head (protect you) and you pay for that roof. In Russia, the state provides krysha for Russian Oligarchs; with organized crime, the Oligarchs then provide krysha to lower level businesses in a massive pyramid scheme.
In 2007, Derevyanko was appointed deputy chief of Internal Security.
Derevyanko was paid US$300,000 per month from KUM LLC for his underground law enforcement roofing services. The funds came from Gorbuntsov’s Capital Trade Bank. Payments were couriered first to former FBS officer Yuri Mikhailovich Vasilyev(Васильев Юрий Михайлович), who delivered the payments to Derevyanko.
Watches, mansions, Swiss bank accounts
Derevyanko was also gifted luxury goods and real estate. If Derevyanko wanted a luxury watch for his US$300,000 monthly protection pay-off, Vasilyev ordered it from Safoniev Sergey Vladimirovich (Сафониеву Сергею Владимировичу) in Moscow. According to Gorbuntsov, Derevyanko has over 100 luxury watches bought from Safoniev’s shop with roofing proceeds of crime. KUM LLC gifted Derevyanko a house in Lapino in the Odintsovo District of Moscow.
Another federal law enforcement officer who provided protection services for KUM LLC was Dmitry Viktorovich Zakharchenko (Дмитрий Викторович Захарченко).
Zakharchenko worked in the construction crime department of the Russian Ministry of Internal Affairs. He was well-known in the construction industry because he invented legal problems for builders, and then forced them to pay him to make those fake problems go away.
KUM LLC paid him €150,000 per month for roofing services, and he also took a cut of profits from construction projects acquired by KUM LLC using his extortion efforts.
In order to pay Zakharchenko under the table, Gorbuntsov helped him set up two companies – Bachelor Group Inc. in Panama and Ancillmar Ltd. in Cyprus, with his father, Viktor Dmitrievich Zakharchenko, as the fake director.
Gorbuntsov flew Zakharchenko and his father on his Canadian-bought Bombardier private jet from Russia to Switzerland and helped them open a bank account for their laundered money at the Dresdner Bank Ltd., now called LGT Bank (Switzerland) Ltd., located at Rue du Rhone 21 in Geneva. The LGT Bank (Switzerland) Ltd., deposed Gorbuntsov in his affidavit, provides private banking services to Russians without asking questions. Gorbuntsov wired Zakharchenko proceeds of crime equalling US$800,000 to the Swiss bank account of Ancillmar Ltd. to pay his first roofing invoice.
When the Russian mob is done with you
At this point in his career as a banker for dirty money in Russia, Gorbuntsov either knew too much or wasn’t making his roofing payments up the chain of command to stay alive in Russia, and had to go.
In April 2009, he says that he was summoned to a meeting with Averin at the Café Denis on Mozhaiskoye Highway in Moscow. At the meeting were each of the KUM LLC partners – Krapivin, Usherovich and Markelov, as well as Solntsevskaya leader Averin, Evgeny Grigoryevich Khokhalkov (Евгений Григорьевич Хохальков), a former general with the FSB and Pyotr Chuvilin (П.Ю Чувилин).
Gorbuntsov was told that he owed money to KUM LLC and was ordered to pay it back, otherwise there would be life or death consequences. Days later, they appeared at Gorbuntsov’s bank, forced him out – with armed members of the Solntsevskaya – and informed staff that he was no longer the bank’s owner.
Zakharchenko then met with Gorbuntsov and warned him that he was about to be arrested and charged with the murder of Ruslan Yamadayev and the attempted murder of Alexander Yurievich Antonov.
Flee and leave your wife to deal with the mob
After that meeting, Gorbuntsov says he drove to Moscow’s private jet hanger, Vnukovo-3 Airport, and left Russia for Moldova, leaving his wife and son behind to deal with Russian organized crime.
When he was in Moldova, KUM LLC took over his businesses. In order to gain control of his banks, they brought his wife to a meeting with the Solntsevskaya and demanded that she sign notarial documents to assign his shares and assets to KUM LLC. She was told that if she signed the papers, she would be allowed to leave the meeting alive. If she did not, she would be killed and they would kill her son.
She went for the “stay alive” option and the banks became the property of KUM LLC and presumably, the Solntsevskaya, as the silent partner.
Gorbuntsov stayed in Moldova until 2010, when he moved to London. In 2012, there was an assassination attempt on his life in London, which he survived. He claimed asylum in England, alleging that he was in Putin’s inner bank circle, and would be killed if he returned to Russia.
He has since been accused of money laundering in Moldova and in Russia; charges that he denied. He was allowed to remain in the UK.
Gorbuntsov, allegedly with no ties to Russia, managed to stir the pot in Russia’s highest circles to get the leadership of the federal government interested in the money flows to the KUM LLC and its partners, except the Solntsevskaya leaders Mogilevich and Averin – it’s still hands off for them.
In 2016, one of Zakharchenko’s apartments was raided and police say they found US$123 million in cash at the apartment. He was convicted of taking bribes from Markelov, Usherovich, Ivan Stankevich and Dmitry Motorin.
In 2018, Markelov was then arrested for his role in the bribery scandal and also convicted. Usherovich fled to one of his mansions in Europe.
The KUM LLC partners were gone.
Derevyanko went on to become head of the Main Directorate of the Ministry of Internal Affairs for the Central District, but was removed from his post by Putin in 2014, along with 18 other employees under him, but not before he was able to accumulate significant assets, including a 60 metre yacht called “Anna” in France, a villa in the French Riviera, five mansions in Moscow and mansions in Znamenskoye and Lapino (the mansion bought by the KUM LLC for him).
Russians began to ask how it was possible that federal law enforcement officers were Oligarchs, with mansions in France, yachts, private jets and billions of dollars in assets parked overseas.
Someone like Derevyanko being paid US$300,000 per month under the table earns US$36 million in ten years but that’s just for one client. If he had 100 clients, he’d be fast-tracked to Oligarchy.
Ties between Ukraine, Russia and Canada
And Derevyanko did have other clients. At least one tied to Canada.
According to Russian media, Derevyanko is involved in several corruption-related litigations, apparently as a witness, in connection with roofing payments he received from the Ukrainian business partner of a wealthy Canadian businessman. Those payments included $3 million and free plots of land for fixing criminal cases with Natalia Agafieva and selling undervalued Russian state assets through the Sberbank (sanctioned by the United States). Another US$5 million was paid to him for helping obtain mining rights in Russia. This is all allegedly.
Moreover, allegedly before the murder of Vyacheslav Ivankov (known as Yaponchik), Derevyanko assisted this same partner of the Canadian to negotiate a US$10 million payment in cash to Yaponchik.
Yaponchik was a partner of Averin and Mogilevich. To have Yaponchik, Averin, Mogilevich and Derevyanko allegedly involved in a dirty deal involving Canada is a concerning cross-over – not the least of which is the fact that Derevyanko was a Russian federal officer (e.g., an agent) at this time. What’s he doing tied to Canadian business interests, allegedly collecting bribery payments?
Below is a photo provided to a Russian media site, allegedly showing part of the payment to the Russian mob, routed through Derevyanko (the Putin-appointed government official) as middleman, that was from the partner of the Canadian. The Russian media site says that everyone in the office took a photo with the bribery money – proceeds of crime really – because no employee had ever seen so much US cash.
Russian securities fraud
Mogilevich and Averin are relatively known to Canadians and Americans. With other members of the Solntsevskaya Russian organized crime group, they set up a company in Canada called YBM Magnex International Inc. to infiltrate the capital markets, steal from investors and launder money.
According to St. Petersburg insider and journalist Dmitry Zapolsky (mysteriously murdered), who wrote the definitive book on the Russia’s gangster state from personal knowledge called Putinburg, Averin and Mogilevich were sponsored and bankrolled by KGB chief Yevgeny Primakov to set up in Hungary and take the Solntsevskaya global, where they would steal from foreign countries and open up new navigation routes to move dirty money from Russia.
Where is financial crime heading? Where will enforcement be focused?
With financial crime costs rising for law enforcement, investigations, compliance and reporting, and the number of predicate criminal offenses and sanctions lists increasing, the ability of financial crime sector organizations and governments to respond is shrinking.
2022 changed the financial crime space
2022 ushered in new geo-political realities which will shift the entire financial crime space. For example:
The Russian invasion of Ukraine is causing significant increases in sanctions compliance and investigations into Oligarch source of funds.
The US focus on China as a geo-political risk with Russia, shifted the focus of Western nations and their resources from addressing external terrorism threats, and correspondingly, away from counter-terrorist financing. Terrorism is increasing in several African countries so the threat remains but geo-political shifts have caused shifts away from terrorism.
The pervasive fraud in the crypto sector finally trickled down after several years, overburdening law enforcement and investigations teams worldwide, as well as financial crime experts, pulling them away from other financial crime work. Banks went back to blanket de-risking crypto companies as too high-risk and expensive from a compliance view. The explosion of international payments fraud, generally, has overwhelmed financial crime sector participants.
The US-driven initiative to “shore-up” rare earth elements and critical metal supplies, and the supply-chain for the US market in anticipation of the energy transition (what the US calls “friend-shoring”), means that the corruption-infused mining industry will become a big focus.
This will cause a focus on securities fraud outside the US (and on to Canada and Africa), because the mining sector will become too important to tolerate systemic fraud. Investor trust will have to be assured for the US policy of friend-shoring in Canada and other countries to succeed.
Climate change is going to result in global food insecurity in conjunction with climate-driven mass migration, which will impact the sourcing of food resources, especially fishing.
This in turn will cause Western enforcement agencies and policy agencies to tackle the shipping industry and insurance from a financial crime and beneficial ownership perspective to stop IUU fishing and fish laundering (see here about laundering fish).
National crypto systems
In the back drop of the above, the plans of Islamic countries (Shia and Sunni alike) to complete their previously-announced shared crypto systems to enable them to operate outside of the US dollar financial system, may take shape in 2023, but even if it does not, countries subject to US sanctions, or at risk of US sanctions, will likely continue to cooperate together to develop their own crypto solutions at national levels to eradicate those risks.
We knew this was coming since 2014, but it has never been determined to be a national security risk of the US or its allies.
A worse-case scenario would be if the Islamic countries’ crypto plans, and the crypto plans of heavily sanctioned countries converge into a shared new financial system bubble, with most of the world’s growing populations opting-into their own system. There’s always a danger of over-using sanctions and its a delicate balance that the US Treasury considers when it makes its designations. Not all nations align on sanctions and its not realistic to expect that they will, given national sovereignty.
Singapore, which has the FATF presidency for the next two years, has declared that its focus will be on asset recovery but its day has come and gone. Five years ago, movement on asset recovery for financial crimes was really needed – now there are greater priorities. Unfortunately, the FATF and some FIUs that issue risk assessments have wholesale not addressed IUU fishing or shipping vessel flagging and regulation gaps that allow blue crimes to grow, threatening global food security.
Decrease focus on other areas
With resources that are limited, governments and law enforcement agencies cannot possibly tackle all the financial crime that arises and choices will be made to prioritize areas that correspond with new geo-political risks and climate change, above all else, and to de-prioritize others.
Areas that will gradually decrease in terms of small to mid-sized money laundering investigations, enforcement and cases in 2023 and beyond will include organized crime, real estate laundering, human trafficking, drug trafficking, money laundering in the gambling sector, corruption (except in the mining sector tied to Africa) and terrorist financing.
2023 will be a year of greater visibility on the new hot button items, leading into 2024 where we will being to see the reporting of predicate offenses and large financial crime investigations of IUU fishing (deforestation as well), mining corruption, securities fraud, fraudulent flagging of vessels, and climate-related crimes. A few of these areas are tied to state actor conduct, which is inconsistent with how anti-money laundering compliance works so changes will likely be made to enable the refocusing of risks on such actors and the reporting thereof.
The global nature of these areas of investigation mean that FIUs will improve the quality and quantity of information sharing. The move to revealing the identity of shareholders of private companies (the so-called beneficial ownership initiative) will undergo a significant shift to the shipping sector for investigations into IUU fishing. The reality is that with food security causing global hardship, governments will care less about who controls the bank account of a shell entity of a drug trafficker and more about who controls ships engaged in IUU fishing.
None of these changes to the financial crime sector will happen overnight, but they are happening.
Shoring up for a different financial crime future
In the interim, shoring up for a different financial crime future by understanding the following will prepare one for financial crime policy shifts: IUU fishing and its risk areas; the difference between rare earth minerals and critical minerals and where they are mined, and processed, as well as their financial crime risks; corruption tied to the mining sector and its risks; securities fraud in the mining sector and its risks; and how the flagging and registration of ships occurs and the gaps that exist.
They have been called many things – mercenaries, irregular forces, private military contractors (PMC), and private security companies (PSC) – whatever the phrase, PMCs have been around for a very long time.
The war in Ukraine recently brought the use of private soldiers into focus – Russia has hired at least three such groups, the Wagner Group, Redut, and Patriot Private Military Company, to fight in Ukraine.
PMCs are a growing international business.
There are private military contractors from all over the world, including the US, Russia, Iran, Canada, and South African. Many are former elite military combatants, more skilled than local forces. The biggest contractor of PMCs is the US government but that may have changed with the Ukraine war.
PMCs in history
The most well-known example of PMCs in the world was the military group who worked for a woman pirate named 石陽, Queen Shí Yáng, also known as 鄭嫂. Queen Shí Yáng had 70,000 men who worked for her aboard more than 1,600 vessels. In the early 1880s, they controlled the South China Sea and Pearl River Delta, routinely defeating the Qing Dynasty navy in coastal battles.
Shí Yáng’s group earned revenues in a variety of ways, including as mercenaries for warring Vietnamese rulers, by controlling the importation of salt into China, by collecting navigation taxes, and looting foreign vessels entering China’s waters. Mercenaries were paid 20% of all the loot collected by Shí Yáng.
The Roman Empire had PMCs called the Praetorian Guard. They were private soldiers who, for over 300 years, protected powerful generals and politicians. Wealthy families often had thousands of praetorians safeguarding their family, land and business affairs. Praetorians became a powerful group in Rome, and the more powerful among them, at one time came to control who would succeed as emperor of Rome.
Medieval Europe had a booming conflicts market, and PMC were used to engage in wars, steal land or to protect businesses for the wealthy.
Byzantine emperors hired Norse PMCs known as the Varangian Guard. In the 11th Century, nearly half of William the Conqueror’s army was made up of PMCs, and King Henry II hired PMCs to deal with the rebellions of 1171–1174. The Pope’s Swiss guards, now part of the Swiss Army, used to be PMCs.
An obvious example of the use of PMCs, but the least discussed, was the use of PMCs in the enslavement trade. Henry Bath, in his book series “Travels and Discoveries of North and Central Africa”, which describes his mission to several countries in Central Africa in 1856, details the use of local armed private forces hired by foreigners to capture humans in Central Africa for enslavement.
PMCs, in one form or another, have always been part of the culture in manufactured and real conflict zones, hired to protect legal and illegal commerce for private enterprise, organized crime and in some cases, for governments.
The Wagner Group is owned by Russian oligarch Yevgeny Prigozhin. Prigozhin became acquainted with Putin when Putin was a municipal politician in St. Petersburg. Murdered Russian organized crime leader Shabtai Kalmanovich, was part of the same circle in St. Petersburg. Before Kalmanovich was horse-traded back to Russia from an Israeli jail, he used PMCs to engage in diamond and minerals trafficking in Sierra Leone, and to protect Joseph Momoh.
Defending extraction rights
PMCs continue to be frequently used to protect mineral resources for private enterprise, including in large part, by Canadian owned extraction industries.
Some PMCs act as intermediaries for black bag deliveries. Black bag deliveries (called black suitcases in Europe and Asia) are corruption / bribery payments made to politically exposed persons (often politicians), a common occurrence in the mining and extraction industries in Africa.
The Wagner Group is one of the PMCs operating in the Central African Republic on behalf of the government, and to protect private mining companies.
PMCs remain the protectors of mining assets and mining rights in most conflict areas of the world because they are effective at what they do for private commerce. Many public and private enterprises could not operate in conflict zones without PMCs because the risks to assets, investments, manpower, infrastructure and executives are extremely high. PMCs mitigate risks.
The mining company Freeport-McMoRan hired the PMC company Triple Canopy to protect its mining rights and mining operations in Papua, Indonesia, against local insurgents. In South Sudan, DeWe Security provides PMC services to protect the contractual rights and operations of the China National Petroleum Corporation.
PMCs also operate in Syria, to protect oil and gas assets, and in Mali, under contract with the government.
PMCs can be effective
PMCs can be effective.
PMCs from South Africa and Eastern Europe were hired by Nigeria for a search and destroy mission to eliminate the terrorist group Boko Harem from Nigeria. They drove out Boko Haram in weeks – something the Nigerian military had not been able to do in six years.
Another PMC group, Executive Outcomes, was paid US$1.2 million a month to successfully contain and quell a rebellion in Sierra Leone. In comparison, the United Nations went through US$47 million for one month in Sierra Leone with zero impact.
In Somalia, PMCs hired by the UAE and the Somalian government effectively eliminated the piracy problem in the waters off the coast of Somalia. According to Lloyd’s of London, there have been no attacks on merchant vessels off Somalia for the last four years, saving US$6 billion in costs.
In the 2011 clip below, PMCs from the Trident Group, open fire on Somali pirates and prevent a pirate attack.
PMCs used to obstruct justice
PMCs also provide intelligence and pre-litigation services.
In Canada, the Israeli groups Tamara Global and Black Cube, run by former Mossad agents, were used in a litigation connected to Ontario lawyers, to come to Canada to obstruct justice and defeat the rule of law in a civil proceeding.
To locate an Ontario Supreme Court judge named Frank Newbould, who presided over a key litigation, and once located, to lie to Newbould so that he agreed to a meeting. And at the meeting to engage him in a conversation under false pretenses, to egg him on to make anti-semitic statements, which would then be used as grounds for appealing a court decision.
The mission was successful except for the last part because Newbould did not make anti-semitic statements at the meeting.
The use of foreign PMCs in the obstruction of justice in Canada is probably less shocking than the fact that nothing happened to the lawyers involved in the plot.
Dangers of PMCs
The use of PMCs is growing throughout the world and there are dangers associated with their growth, beyond manipulating courts and interfering with the administration of justice.
The attractiveness of PMCs to those who hire them is that they provide deniability, which means they act in a foreign country in a vacuum outside the rule of law.
Among the dangers is that the super rich, the fortune 500 executives, will be able to buy power, leading to a situation where, with private armies, they become more powerful than some countries. The super-rich will become superpowers, and above the law.
Another danger is that while PMCs are stateless (meaning the men and women who sign on to be PMCs can come from any country), locals see them as a representative of a country. Blackwater, for example, was seen by the Iraqis and Iranians are being the US military, as opposed to simply PMCs. The Wagner Group has more than just Russian nationals engaged to perform PMC work, but locals in African countries, and in Syria tend to see them as tantamount to the Russian military.
For example, a PMC group comprised of contractors from France in Serbia will be viewed by Serbians as if they are an arm of the French government, even though they are a private group whose paymaster may be a private sector company. Any unlawful, menacing or inappropriate conduct will be attributed to the French government, which harms its international reputation.
There is also the danger that wars could be started without states. In the CAR, for example, and specifically, it is not beyond the realm of possibilities that another PMC group is hired to battle the Wagner Group and, among other things, to attempt to gain control of the mining infrastructure they protect for their clients, or to destabilize existing mining activities for another actor whom that PMC is fronting for.
This is a risk for many African countries that, hiring PMCs to support economic growth and protect foreign investment, may cause other non-transparent actors to use PMCs to engage in commerce-related warfare to gain competitive advantages illegally, especially those with viable deposits of rare earth elements and critical minerals.
Most countries use PMCs, and allow them to operate – tacitly or overtly. With armed non-state private military actors assuming more control in more areas around the world, state power will decline, which has the potential to upend international relations as we know it.
Another crypto company bit the dust early this week, and with it, up to US$10 billion in customer money evaporated. BlockFi was a digital currency exchange, deposit-taking institution, and lender. BlockFi also issued and sold securities. It was not government-registered to provide any of those financial services in Canada. In early 2022, it settled a case with the SEC for misrepresentations made to investors.
Like many others in crypto before it, it promised to “protect your assets” if consumers used its services. On Monday, it filed for bankruptcy protection. According to the bankruptcy filings, consumer assets were put at risk and not protected.
In the past few months, a slew of crypto companies – Terra-Luna, Three Arrows Capital, Celsius, Voyager Digital, FTX and now BlockFi – have gone kaput, and with them, billions upon billions of dollars of customer money are gone.
Voyager Digital is in a different category than the others because it is a Canadian public company, and one of its directors was a lawyer in British Columbia. It is being sued in the US for being an alleged Ponzi scheme.
The combined losses of those six crypto companies are of unprecedented proportions. This isn’t a Bernie Madoff sized evaporation of customer money held in trust – it’s many Madoffs. Before it blew up, CME Group CEO Terry Duffy said FTX was a pump and dump scheme, eg., like a capital markets fraud scheme.
Some of the founders of the six defunct crypto companies fled to extradition-friendly countries, where they are now professing their innocence in the court of Twitter.
It seems obvious that many crypto guys are not good at running companies but they seem exceptionally good at the art of deception.
Crypto dudes fool everyone
These crypto dudes fooled executives at the Ontario and Quebec pension funds, they fooled lawyers, they fooled banks, they fooled experienced venture capitalists, they fooled journalists, they fooled members of parliament in several countries, and they fooled regulators.
Canadian Kevin O’Leary talks about how he was fooled too, and talks about being targeted with hate on social media (and by the media) for his ties to FTX (here).(Footnote 1)
We got a taste of early deception in 2017, when a Canadian crypto dude settled with the SEC (see here) for lying in a pitch deck, on phone calls and in emails to banks, lawyers and investors about advisors, claiming untruthfully that several prominent people were advisors of his crypto company. Not only were they not advisors, but they had no knowledge that their likeness, bio and name were being used without consent to raise money, until reporters called them.
In crypto culture, some of these guys don’t just fib about advisors, high investment returns or the protection of customer assets – the US government warns that some are impersonating people (see here) as part of their business model.
Where were regulators?
The effects of the six crypto debacles, including British Columbia based Voyager Digital, are rippling across the globe, leaving many wondering how such vast schemes went on for so long without regulators stopping them, despite numerous red flags and warnings.
It’s not like there are no laws to protect the public from this. In Canada and the US, numerous laws, including securities, consumer protection, competition, banking, fraud, financial crime, and lending laws all have a role to play.
One of the things emerging from these six crypto debacles is the extent to which crypto is a clubby, secretive world of guys who all know each other, and do transactions between each other. Not only that, if one looks at all of them together, it appears that some of them may have allegedly fronted for each other’s balance sheets or engaged in round-tripping.
Round-tripping is a type of activity where money (or crypto) is moved in a circuit. It’s a type of financial magic trick that creates the illusion of having funds (or of solvency, assets, or revenues). Round-tripping is unknown to most professionals except in the world of public auditing. We wrote about round-tripping in the capital markets here and here.
With multi-party round-tripping for credit, a number of companies send money to each other, one by one. When credit is obtained by party one, the money is sent to party two. When credit is obtained by party two, the money is sent to party three. Around and around, it goes. The result is that the amount of credit extended by victim banks or other parties balloons, filled with hot air.
Like all magic tricks, the illusion only lasts so long. The balloon must burst.
A user on Twitter questioned the money movements of BlockFi and FTX, which we’ve paraphrased:
“BlockFi gave hundreds of millions of dollars to FTX; FTX gave it to its Alameda branch; Alameda gave it to Emergent, a shell company owed by SBF, FTX’s founder; Emergent used the money to buy shares of Robinhood; the Robinhood shares were used as collateral for a loan from BlockFi to FTX; FTX then used that money to bail out BlockFi.”
Changpeng Zhao, the CEO of the world’s largest crypto exchange, Binance, also tweeted about the money movements. We’ve paraphrased what he wrote like this:
“Voyager Digital gave hundreds of millions to Three Arrows Capital; FTX-Alameda gave $100 million to Three Arrows Capital; FTX-Alameda gave $110 million to Voyager; FTX-Alameda then borrowed $377 million from Voyager; Three Arrows Capital went bust; Voyager went bust.”
And then FTX went bust. And then BlockFi went bust.
But its circuitous, right?
It was a kind of a merry-go-round of the same money spinning between many of these kaput crypto companies. Unfortunately, there were no adults in sight to turn off the circus lights at midnight and send the kids home.
1: In that interview, O’Leary pitches using Canadian digital currency exchanges, which he alleges are “safe” if they are public companies – we know that isn’t the case because of the Voyager Digital case – it was a Canadian public company that was a digital currency exchange. FTX operated in several provinces in Canada, as well, as a digital currency exchange and it was not “safe”.
The petrol mafia case was first police case of ‘Ndrangheta and Camorra convergence across Italy
A Deal with the Mafia
Here’s a question – what do you do to revive a failed oil business you inherited if you have no business skills and no money?
You might make friends with a Mafia associate on Facebook. And if you’re going to do this, you might as well go big and partner with the most feared and secretive Mafia organization in the world, the ‘Ndrangheta. If it goes bad, you might be dead; if it goes well, you might build a billion-dollar empire of dirty money.
That’s what Italian singer Ana Bettz did.
She almost couldn’t help herself – she was set to lose her luxury hotel apartment in the fashionable district of Milan, her Bentley and Rolls Royce, and access to plastic surgeons on speed dial.
Ana Bettz, who is really Anna Bettozzi, went to the powerful Camorra families in Naples and the dreaded ‘Ndrangheta in Calabria to finance her entry into the criminal world and become a petrol Mafia.
With their help, she built a billion-dollar empire that spread across Europe, using numerous shell companies to traffic in petrol and launder hundreds of millions for the Mafia.
A Ride to the Cannes Film Festival
It almost came crashing down in May 2019.
Bettozzi was on her way to the glamorous Cannes Film Festival in France to party with the rich and famous, being chauffeured in her favorite car – the Rolls Royce. Her deal with two of Italy’s most powerful Mafia groups was going well; business was booming.
The six hour drive from Milan to the Italian northern border town of Ventimiglia was pleasant enough; she could see Sardinia, her homeland, in the far distance across the glittering blue Ligurian Sea, as the car raced along the Italian coast.
In the trunk of the Rolls, she had stuffed €300,000 in dirty bills into a pair of high boots – a perfect way, she thought, to smuggle cash into France and avoid making a currency declaration at the border.
She had to hide the cash otherwise it would raise messy questions about its provenance.
She couldn’t exactly tell French border guards that it was from bootlegging oil with the ‘Ndrangheta. They would call Italy’s financial police, the Guardia di Finanza, and anti-Mafia investigators, the Direzione Investigativa Antimafia (DIA). The gig would be up and she couldn’t risk that. It wasn’t just the police she would have to face; she would also have to face the Mafia.
If Bettozzi had been paying attention during the trip from Milan to the French border, she might have noticed that the DIA and the Guardia di Finanza had been following her Rolls Royce for over six hours, from the moment she had stepped out of the lobby of the Gallia Hotel that morning.
The ‘Ndrangheta and secret service agents share a common operating rule – always have a mirror to your back. Bettozzi preferred her own rule – keep the mirror on your own face. For the past few months, teams of federal law enforcement agents had her under surveillance after she came on their radar when she made a call to the Mafia on a phone line they were intercepting, discussing the petrol smuggling business.
As the Rolls passed though the small town of Ventimiglia and approached the Italian-French border, the Guardia di Finanza made their move. They stopped her car before she could enter France. Bettozzi was detained.
Call to Mafia Lawyer
She asked to make a call to her lawyer – Ilario D’Apolito. She was playing right into their hands. You see, D’Apolito was the lawyer for the petrol trafficking operation with the Mafia who, police say, allegedly incorporated shell companies for the criminal operation.
He was one of the people they were investigating as part of “Operation PetrolMafias”. There were wiretaps on their phones, so police were listening when Bettozzi called her lawyer after she was detained. Whatever she said to him wasn’t privileged or confidential because that does not apply when lawyers are used (wittingly or not) for fraud or crime.
Bettozzi told the lawyer that she had been stopped and detained. She was panicking – not because of the €300,000 stuffed in her high boots – but because she had a safety deposit box key in her purse and she didn’t want the Guardia to find the key. She had €1.7 million in proceeds of crime stashed in that box back in Milan.
“Take the key”, instructed the lawyer, “and hide it in the chauffeur’s clothing.”
The lawyer then spoke to the chauffeur and told him to put the key in his underwear.
Catch and Release
The officers listening in on the intercepted call then phoned the Guardia in Ventimiglia, who had detained Bettozzi, and told them that Bettozzi had told her lawyer about a lot of money hidden in a safety deposit box at the Gallia Hotel in Milan, and that the key was going to be stashed in the underwear of the chauffeur.
Law enforcement agencies will often conduct a controlled intervention where they cause a disruption to a suspect’s routine because it causes suspects to panic and react. Often the first thing suspects do is call the lawyers who helped them paper-up shell entities, and then they call their crime partners. They call those lawyers because they are concerned with the paper trail; they call crime partners because they are concerned with the money trail.
The Guardia decided to do a “catch and release,” and let Lady Oil continue her trip to the Cannes Film Festival after they seized the €300,000 in her boots.
When the safety deposit box was opened in Milan, law enforcement found €1.7 million in cash, wrapped up in baggies.
From May 2019 to April 2021, the police continued listening to Bettozzi’s phone calls and those of her lawyer, and learned how two powerful Mafia organizations – the Camorra and ‘Ndrangheta – helped turn her failed business around by buying illegal oil and gas from as far away as Kazakhstan and Russia, and importing it into Italy.
Early Life in Sardinia
Anna Bettozzi grew up on the island of Sardinia. She always had dreams of being famous. In a 1999 article in Italy’s La Repubblica, after her house had been robbed, she was quoted as saying that she “dreams of conquering the world”.
She went into real estate in the hopes of meeting one of the many Russian Oligarchs, other billionaires, actors and European royalty who summer on Sardinia’s Emerald Coast each year.
She came up with the stage name Ana Bettz, and pivoted to singing, self-financing several CD albums. She had a small following in Russia. In 1997, she paid for Michael Jackson’s producer to work on her first music video called “Ecstasy”, hoping it would give her career a boost. It didn’t.
She married a wealthy Italian oil dealer named Sergio Di Cesare, who controlled Europetroli SRL, an oil reselling business.
Di Cesare had a summer house in the Porto Rotondo area of Sardinia, beside Italy’s Prime Minister, Silvio Berlusconi. Bettozzi and Berlusconi became close friends. Very close.
Bunga Bunga Parties
During this time, the Italian Prime Minister was regularly hosting his now famous “bunga bunga” parties, which were after dinner sex parties for wealthy old men. At these “bunga bunga” parties, young women were hired to dress up in costumes, and perform sexual acts for Berlusconi and his old male guests. At least one girl regularly hired was underage – 17-year-old Karima el-Mahroug.
Bettozzi was also very close to Dario Lele Mora, one of the men who procured young women for the Prime Minister’s sex parties.
Berlusconi and Mora were both charged and convicted of prostitution-related charges. At Mora’s trial, el-Mahroug testified that “a singer close to Berlusconi attended the [bunga bunga] parties” – that singer was Bettozzi.
For at least six years – from 2006 to 2012 – Bettozzi hosted her own famous parties every August at her husband’s villa in Sardinia with Berlusconi.
Russian Oligarch Roman Abramovich, a close friend of Berlusconi, arrived in Sardinia for many of the Bettozzi-Berlusconi hosted summer parties, with numerous other wealthy Russian men on his superyacht “Le Grand Bleu.”
Russian President Vladimir Putin, not to be left out, went to Sardinia too, to hang out with Berlusconi in August. What did they do there? Only Bettozzi can say for sure.
Obstruction of Justice and Witness Poisoned
After his conviction, Berlusconi threw his wealth into one appeal after another and was eventually acquitted on appeal. But the case didn’t stop there. He was then accused of obstruction of justice for bribing witnesses, allegedly paying as much as €10 million to Karima el-Mahroug, who changed her testimony.
Another young witness died of a mysterious poisoning. If it was Novichok, the deadly nerve agent developed by Russian scientists to poison opponents of the Russian government, it would be undetected in an autopsy. Novichok was the nerve agent used in the attempted murder of Alexei Navalny.
The obstruction of justice proceedings against Berlusconi have been going on for 8 years. The prosecutor in the case alleges that Berlusconi’s “bunga bunga” parties involved sex slavery, and that Berlusconi gave away money, houses, cars and horses to stop witnesses from testifying against him.
Death of SergioDi Cesare
In 2018, Di Cesare died, leaving his oil business in shambles and with significant debt. Bettozzi took over the ailing business. Lele Mora was right there too, fresh from prison, helping Bettozzi at oil and gas shows.
Bettozzi needed capital to buy equipment, hire employees, operate the business and buy oil. She also needed petrol sellers and introductions to a network of buyers.
But no one in traditional finance would invest in a business operated by one of Berlusconi’s entertainers.
Using Facebook to find Mafia Associates
Using Facebook, Bettozzi reached out to Alberto Coppola, an associate of the Camorra in Naples. Coppola was known to be an expert in trade-based money laundering in the oil and gas sector, with expertise in fictitious invoicing.
Coppola agreed to help Bettozzi. He brokered deals for financing with three powerful Camorra Mafia families, the Moccia, the Formicola, and the Casalesi, which allowed Bettozzi to revive the fortunes of the company.
Disguising Fuel Imports
Coppolla helped to operate the business, while Camorra leader Alberto Moccia provided underground contacts to buy illegal oil and gas from Eastern Europe, and traffic it in Italy. One method they used was disguising diesel fuel as agricultural fuel in trucks outfitted with special levers that could add dye to fuel in tanks to change its color to fool inspectors.
Mafia accountants Claudio Abbondandolo and Maria Luisa Di Blasio oversaw payments of dirty money. The ‘Ndrangheta had to approve the deal with the Camorra and Bettozzi. The Camorra became the intermediaries between Bettozzi and the ‘Ndrangheta, who agreed to let the Camorra finance Bettozzi in exchange for a cut and for money laundering services.
Sales of the company grew to a whopping €370 million in 18 months – all of it dirty money. Bettozzi expanded beyond oil trafficking and joined the Mafia in forcing businesses to pay extorting payments under threats of violence – Russian Oligarch style, where extortion payments were filtered up to leaders in a pyramid scheme.
For several years, the DIA and Guardia di Finanza intercepted and recorded phone calls between Bettozzi, Coppolla, the Camorra and the ‘Ndrangheta.
Taking in over €8 Billion per Year
During one of those phone calls the police were intercepting, Bettozzi told her sister that she was working with the Camorra, and they were earning between €25 million to €30 million per day.
That’s €8.1 billion per year.
Although very secretive, the‘Ndrangheta went into business with Bettozzi because, as they were heard saying during an intercepted phone call,“trafficking oil yields more than trafficking drugs,” meaning it was more lucrative to traffic oil.
The police had recorded a meeting in ‘Ndrangheta-controlled territory in the town of Vibo Valentia. The meeting was between the Mafia and representatives of the Kazak oil company, KazMunayGaz, discussing oil sales to service Calabria.
The discussion involved the possibility of building a transshipment dock in the ocean to dock oil tankers, so that oil shipments could be delivered to Italy without passing through the Port of Gioia Tauro. They didn’t want it to transit through the Port of Gioia Tauro because it is controlled by other ‘Ndrangheta families who were not part of their money laundering business.
Although Bettozzi originally struck her deal with the Camorra, the ‘Ndrangheta – perhaps because of its greater power in the global organized crime hierarchy – dominated the financial side of the business and controlled most of the shell companies, properties and bank accounts used to launder the dirty money.
The Lady Oil’s Empire
Bettozzi boasted that she had “created an empire larger than Berlusconis”, and that she was so important, Berlusconi called her several times a day and she often did not take his calls. When she did talk to Berlusconi, the police heard those calls too.
In addition to a luxury apartment in Milan, Bettozzi had a sumptuous gold-infused villa in Rome’s upscale district of Appio-Pignatelli, with a blue lagoon pool, gold furniture, and rococo fireplaces, not far from the home of fashion designer Valentino.
Under her stage name Ana Bettz, she often Instragrammed herself in her villa, or posted photos of herself at the villa on Facebook, wearing high boots and tight clothes.
Arrest and Sentencing of Bettozzi
The Guardia di Finanza and DIA decided to end “Operation PetrolMafias” on April 8, 2021, with the arrest of Bettozzi, her lawyer, Mafia leaders and 60 other people in several early morning raids across Italy and Europe.
Bettozzi was charged with membership in an organized crime group, association with the Mafia, extortion, money laundering, and a host of other charges.
According to police, she arranged, through law firms, to make corporate changes of shell companies to keep members of the criminal association off the corporate records and obfuscated from investigations. The money they earned was used to buy luxury cars and real estate, and was laundered through 100 private companies and bank accounts associated with those companies in Hungary, Bulgaria, Greece, Malta, England and Croatia.
Over €360 million in cash was seized and over €1 billion in assets, including properties and companies.
Last week, Anna Bettozzi was sentenced to 13 years in prison, and Europe’s biggest dirty oil trafficking case came to a close. While police found €360 million in cash, there is still over €30 billion in cash missing.
Rise of the Petrol Mafias
The phenomena of Petrol Mafias is far from over in Europe.
As the ‘Ndrangheta said in intercepted phone calls, trafficking in stolen oil is more lucrative than drug trafficking. With the energy crisis, the opportunities for organized crime to make more profits from illegal petrol trafficking is exponentially greater.
Global energy frauds are coming fast and furious from all directions including at the retail level with pump fraud in Asia, at the pipeline level in Mexico from cartels that siphon oil directly from pipelines while it is in transit; and crude oil theft in Africa. Nigeria lost more than 115,000 barrels per day to oil theft over a 12 month period.