n Cyprus, a new type of investment funds was marketed to clients as a method of avoiding disclosing their ownership of assets. In one case, those funds were used to hide the ownership of offshore companies that allegedly held luxury assets linked to powerful Russian banker Andrei Kostin, including two yachts worth tens of millions, writes CN.
KEY POINTS:
- Two yachtsmen linked to Andrei Kostin were behind secret investment funds in Cyprus known as «Registered Alternative Investment Entities» (RAIFs)
- The funds were managed by a company called Inveqo, which was owned by the wife of a sanctioned Cypriot lawyer.
- The EOIs were being promoted by the lawyer’s firm to his clients as a way to avoid disclosing their ownership following the EU’s corporate secrecy ban
- Ownership of three properties linked to Kostin in Moscow and a neighboring region was also hidden behind investment funds managed by Inveqo.
Two companies Russian state banker Andrei Kostin allegedly used to control two yachts were transferred to secret Cypriot investment funds on the eve of the invasion of Ukraine, making it impossible to trace who owned them, financial records show.
The investment funds were managed by a company called Inveqo Fund Management Ltd. At the time, Inveqo was owned by the wife of a Cypriot lawyer, Christodoulos Vasiliadis, who was sanctioned by the US last year for acting as a «productive enabler» of Russian oligarchs.
Inveqo marketed the special type of investment funds known as ‘Registered Alternative Investment Funds RAIFs’ (or RAIFs) — as a way to help clients avoid disclosing ownership information. This comes after the European Union attempted to clamp down on corporate privacy, according to projection material found among leaked emails obtained by OCCRP.
One beneficiary appears to be Kostin, the longtime head of state-owned Russian bank VTB Bank. Kostin has been sanctioned by the US and the European Union for his close ties to Vladimir Putin’s regime. Anti-corruption activist and Russian opposition politician Alexei Navalny, who died in a Russian prison camp this year, first linked Kostin to a 62-meter yacht, the “Sea & Us,” in 2019 . In February of this year, a US sanctions evasion indictment against Kostin alleged that the banker also owned another yacht, the 66-metre “Sea Rhapsody”. The vessels in question were in his possession through two offshore companies, one based in the Marshall Islands and the other in Belize.
The US indictment states that Kostin «owned and controlled» these two offshore companies through «a series of additional shell companies, purported owners, and trust and investment fund structures,» which were used «to conceal his true financial ownership of the » Sea Rhapsody» and in «Sea & Us». Kostin did not respond to a request for comment sent through VTB bank.
The indictment does not name these structures, but an OCCRP investigation found that in October 2021, as tensions between Russia and the West over Ukraine rose, ownership of the two offshore companies that owned the luxury yachts was transferred to two JITs managed by Inveqo, according to the Cyprus company register and financial records. The funds have since been dissolved and the current ownership of the yachts is unknown.
The Cypriot government introduced RAIFs in July 2018, just two months after the European Union’s anti-money laundering directive required member states to create publicly accessible registers of «ultimate beneficial owners» ( or UBOs) of the companies.
NEITs have received particularly lax regulatory treatment. Unlike most mutual funds, KIEFs only need to be registered – not licensed – by the Cypriot regulatory authority, the Securities and Exchange Commission. REITs are only available to institutional and other professional investors.
«The use of RAIFs to hide even sought-after assets such as yachts highlights how difficult it is to enforce sanctions effectively,» said Stephan Blancke, a fellow at the Royal United Service Institute, a London-based think tank. United Kingdom.
«This raises the question: how many other beneficiaries of these Cypriot alternative investment funds exist and we do not know?», he asked.
Lawyer Christodoulos Vassiliadis, whose firm promoted the funds, said he and his law firm had always acted in «strict compliance» with Cyprus and European Union sanctions and anti-money laundering rules and regulations and of corruption.
He said he had never been made aware that Kostin or «any other sanctioned person» was an investor or beneficial owner in the VEHIs and yachts identified by OCCRP. «I was not informed or aware of this fact. No one has ever informed me of such events,» he said.
Vassiliadis himself was sanctioned last year, along with other «entities and individuals in his network» who the US says acted as «productive enablers of several Russian oligarchs». The sanctions announcement did not mention which oligarchs he was accused of working with, nor did it name Kostin.
Promotion of SIEFs to conceal ownership
Inveqo was founded at the end of 2018 and was licensed as an «alternative investment fund manager» (AIMF). It was purchased in May 2021 by a company owned by Vassiliades’ wife, Eleni Vassiliades, who also worked as an office manager at her husband’s law firm, called “Christodoulos Vassiliades & Co LLC”.
Although Inveqo was nominally owned by Eleni, a leaked email obtained by OCCRP showed that the law firm of X. Vassiliadis included Inveqo in its marketing materials and still referred to it as «our subsidiary».
Although Eleni Vassiliadou did not respond to a request for comment, X. Vassiliadis told OCCRP that she owned Inveqo from June 2021 to May 2023 «as an investment» and was not involved in the day-to-day operations of the company.
He added that the email had been sent as part of a mass newsletter to «many clients» of his law firm and was «not intended to promote or advertise Inveqo». He said the term «partner» had been used to refer to «a firm in my law firm’s referral network and to which my law firm was acting as legal counsel».
«Neither I nor my law firm ever controlled Inveqo in any way, had any ownership interest, or participated in Inveqo’s business or day-to-day operations,» he wrote.
Marketing material in the leaked emails show that KEOEs were pitched to prospective clients as a way of avoiding disclosure of their ownership of assets by new EU transparency laws, which the law firm described as «optimizing the requirements notification of the UBO».
The promotional material describes how a real investor in a KEOE will not appear when Cyprus publishes the register of company owners, but will remain hidden behind the name of an external fund manager.
The material read: “In the case of KIEEs … the shares that will have to be reported to the Registrar of Companies of Cyprus will only be the management shares which, as described above, can be held by anyone. The investment shares/shares, i.e. the shares that the investor will own, will not be disclosed in the UBO Registry». Further through the material, assurances were given to clients that through the AIFM «only the fund manager and the custodian have access to investor information [sic]».
Mr Vassiliadis denied that EUITs were marketed as a way of avoiding disclosure of ownership.
“Neither I nor my law firm ever promoted or permitted the avoidance of penalties or promoted the non-disclosure of asset owners. Any such practice is completely against my professional ethics,» he said.
In another leaked email pitching Inveqo to prospective clients, a Cypriot company called InterTaxAudit — which Vassiliadis’ law firm calls «affiliated partners» Vassiliadis’ law firm calls «affiliated partners» — broke down the disclosure requirements under of the new EU directive.
It is mentioned in the email: «the structure of the CIEF can be a solution to this problem», adding that «since it does not require a UBO, the investors own shares of the Fund, they do not own the assets, so their names are not revealed anywhere».
In other words, clients could continue to hold assets through these funds, but their ownership would remain hidden.
Moving yachts to KEOE
The US indictment alleges that Costin owned the luxury yachts through companies registered in the Marshall Islands and Belize. In October 2021, both these offshore companies were transferred to KEPAE managed by Inveqo: Ostreus RAIF VCIC and Lorenor RAIF VCIC Limited, respectively, as shown in the financial statements.
Kostin was sanctioned by the European Union in February 2022, one day before Russia’s full-scale invasion of Ukraine.
Cyprus made the register of beneficial owners public that summer to comply with the EU’s anti-money laundering directive. But thanks to the EDFs, the pleasure boats could not be found. Additionally, because Inveqo was owned by Vassiliadis’ wife – and not Vassiliadis himself – the company was not affected when the US and UK imposed sanctions on Vassiliadis in April 2023 .
The Belizean company Solston Shipping Limited is still listed as the owner of the “Sea Rhapsody” on the current shipping certificate issued by the International Maritime Organization, a UN agency responsible for regulating maritime transport. However, “The Sea & Us” changed its name to “Serenity and Unity”, and is now owned by a company called Comhold Limited, based in an unknown jurisdiction. The Marshall Islands company that previously owned it, Pasithea Shipping Ltd., has been dissolved. Both vessels were Marshall Islands-flagged until 2022, when they began flying the Malaysian flag. They are currently anchored in the Aegean Sea off the coast of Turkey]].
The two ultra-luxury yachts were not the only luxury assets linked to Costin whose ownership was camouflaged behind Inveqo’s EIRS. In November 2021, the same EUAIs also took over three Cypriot companies linked to Kostin’s properties from previous OCCRP and Navalny investigations: Angerston Holdings Ltd, Castelor Investments Ltd and Eralmor Holdings Ltd.
Angerston owned a luxurious three-story mansion in Moscow, while Eralmor owned a luxury apartment in Moscow. Castelor owned a stake in a country resort in the Tver region northwest of Moscow, for which it paid $58 million.
The indictment alleges that the «conspirators» in question owned Gesford through two shell companies, Aktien Enterprises Limited and Ionics Nominees Limited. (The indictment misspells Aktien as «Atkien» and Ionics as «Ionic»).
In the short time that the Cyprus beneficial owner registry was open, the OCCRP identified Aktien’s owner as Eric Whyte, the son of a Canadian communist who moved to Moscow in the 1960s when Whyte was a child.
Properties linked to Kostin but owned by Whyte included a luxury villa near the French seaside town of St Tropez, a property in Paris on the banks of the Seine, a luxury hotel in the Austrian Alps and a winery in Ukraine’s occupied Crimean peninsula.
The US indictment alleges that one of the alleged «conspirators,» who fits Whyte’s description, «served as the beneficial owner of several of Costin’s assets and … created, owned and controlled a business in Cyprus that operated several of Costin’s companies and assets.»
Gesford’s other owner was Natalia Solozhentseva, a former vice president of Kostin’s VTB Bank and a board member of its Cypriot subsidiary. Solozhentseva was the beneficial owner of a Cypriot company that bought shares in the Russian franchise of the fast food outlet KFC, as well as Russia’s leading discount retailer Fix Price.
Her profile matches that of alleged “conspirator 2” in the US indictment, which alleges she “was an employee of VTB Bank and opened an office in Cyprus specifically to help manage many of Kostin’s shell companies and assets ».
The indictment lists accomplices 1 and 2 as working together to manage Kostin’s yachts, through a yacht management company based in Switzerland and a company based in Cyprus.
Neither Whyte nor Solozhentseva responded to a request for comment.
Since KIEEs were first introduced, the Registrar of Companies, the Cyprus Register of Companies has clarified that the end investors of the funds must be declared, not just the managers of the funds, but it is difficult to know to what extent this is being implemented. In November 2022, the decision of the Court of Justice of the European Union <a href=”https://curia.europa.eu/jcms/upload/docs/application/pdf/2022-11/cp220188en.pdf”>cancelled</a> the requirement of Member States to publish beneficial ownership information for privacy reasons. The Cypriot registry closed public access six days later.
In July 2023, both EUITs managed by Inveqo and used to hold Kostin’s assets were dissolved, for reasons that remain unclear. Inveqo changed ownership in May 2023 and was itself dissolved earlier this year.»