Yacht Watch: Oligarchs Triumph in Courts (So Far)

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by Tyler Durden
Thursday, Jun 08, 2023 - 07:30 AM

By Bradley Hope of Whale Hunting,

Welcome to Whale Hunting, a weekly newsletter delving into the hidden worlds of wealth and power. This week contributor Alex Finley revives her #YachtWatch franchise to catch up on how a number of Russian tycoons are using legal tools to stop Western efforts to seize their assets in the aftermath of the Russian war on Ukraine.

Last September, 250 German police officers fanned out across the country raiding villas and other properties belonging to Alisher Usmanov, a Russian oligarch who made his fortune from the ashes of the Soviet Union, building up an estimated wealth of $14.3 billion. Another 60 officials from Germany’s Federal Criminal Police Office and tax authorities raided Dilbar, Usmanov’s 156-meter megayacht worth an estimated $600 million.

Authorities seized millions of dollars-worth of art and caches of documents. It looked like a massive haul of evidence for a money laundering investigation the state had launched against the oligarch, who was sanctioned by the European Union last year as Russia launched its full-scale invasion of Ukraine.

But last month a German court declared those search warrants were unlawful. The ruling marked a big win for Usmanov, who has joined a chorus of other Russian oligarchs aiming to use the free world’s rule of law and stable justice systems to get back their assets that were seized by governments claiming they were corruptly acquired using Russia’s crony kleptocracy.

According to reporting in Der Spiegel, German officials had moved to a money laundering and tax evasion investigation after sanctions law proved too feeble to do anything more than freezing Usmanov’s assets. While sanctioning oligarchs and detaining their megayachts had proved cathartic for a time, some governments were looking to get the assets off their hands because of the costs involved in maintaining them.

Indeed, German taxpayers have been paying around $70,000 a day to maintain Dilbar, which had been in drydock in a private shipyard in Hamburg when Usmanov was sanctioned. The shipyard eventually needed that space for other clients (Dilbar is the third largest private yacht by volume, with a gross tonnage of nearly 16,000 GT, so it was taking up a large part of the shipyard). The yacht was then tugged down the Elbe river to Bremen, where it has been kept ever since.

A hotel CCTV captures Dilbar being tugged along the Elbe river to Bremen


German officials decided criminal tax law would be better suited to seize Usmanov’s assets and sell them off. They began focusing on tax evasion and money laundering, uncovering 90 "suspicious" money laundering reports and an opaque web of shell companies in Dilbar’s ownership structure.

The yacht belongs to Navis Marine Limited, which is registered in the Cayman Islands. Navis Marine is owned by Almenor Holdings Limited in Cyprus, whose shares are held by Pomerol Capital SA in Switzerland, in a trust for The Sisters Trust, which Usmanov originally created but now claims is related to his sister.

In the raids of Usmanov’s properties on land, authorities found millions of dollars-worth of artwork, including four Fabergé eggs (Usmanov insists they are replicas). The raid on Dilbar and on a warehouse that was holding items that had been moved off Dilbar while she underwent maintenance uncovered at least thirty works of art, including a painting by the Russian-French expressionist Marc Chagall.

But the German courts have determined those raids were illegal. The court said there was no initial suspicion of money laundering when the assets were seized. The judge also criticized the government’s reliance on an investigation by imprisoned Putin critic Alexei Navalny and published on YouTube, declaring it was not evidence enough to have issued search warrants.

Russian President Vladimir Putin presents Alisher Usmanov with an award in 2018 (Kremlin)

Usmanov is pretty pleased with the outcome. His lawyers said the decision had renewed Usmanov’s faith in the German constitutional state. His lawyers are now filing an effort to force the government to pay for damages from the raids.

Usmanov isn’t the only oligarch who has relied on the courts to try to get back his assets, or at least avoid having them auctioned off.

After US authorities won a battle in Fijian courts and sailed away on the yacht Amadea last year, a lawyer for the company that owns the yacht filed a last-ditch effort to prevent the US from selling it off, as President Biden has claimed he wants to do.

The 106-meter yacht, worth an estimated $325 million, is now floating in a San Diego port and costs about a million dollars a month to maintain, according to court documents. The case for forfeiture of the yacht remains sealed, so it unclear if the US government has filed documents to move ahead with selling it. Likely, US officials had been waiting for a last-ditch court effort to play out in Fiji.

Feizel Haniff, a lawyer representing Millemarin Investments LTD, which is the company that—on paper—owns Amadea, filed an appeal to Fiji’s Supreme Court in an effort to overturn the decision that allowed the US government to take ownership of the vessel. He reiterated his argument that the yacht’s ultimate beneficial owner is Eduard Khudainatov—who is not sanctioned in the United States—and not, as the US government insisted, sanctioned Russian oligarch Suleiman Kerimov, whom the US claimed was involved in money laundering and sanctions evasion.

The US determined Kerimov was the owner of Amadea based on a number of documents found during a search of the yacht that proved a number of changes made on the boat had been done at Kerimov’s direction. Those included requests for the construction of a pizza oven and delivery of a spa bed and jet skis and other toys for his kids. The search also yielded another Fabergé egg. (Experts are still trying to determine if it is real or a replica.)

US investigators also rejected the notion that Khudainatov could possibly be the owner of Amadea. He has also been held up as the owner of Scheherazade. That megayacht has been detained by Italian officials and is suspected of being Putin’s yacht. An investigation by Navalny (similar to the one that German courts found insufficient as evidence for search warrants) revealed a number of names on Scheherazade’s crew list who were also members of the presidential security service. The yacht is worth an estimated $700 million.

US authorities questioned how Khudainatov, who, unlike Kerimov, is not a multibillionaire, could afford to own both Amadea and Scheherazade, two yachts with a combined worth of more than a billion dollars, suggesting Khudainatov was being held up as a straw owner of both yachts.

On May 18, Haniff lost his appeal to Fiji’s high court, which determined the US seizure of the yacht was legal and noting there was nothing to be done about it anyway since, well, that ship had already sailed. Now that Millemarin has run out of legal options and the Fiji court case has been resolved, we’ll keep our eyes open for when the US formally files for forfeiture of the Amadea.

The US has given a license to allow the auction of a different yacht to go forward, however.

The Amadea in Antibes, 2019 (Sukkoria)

The Alfa Nero has been docked in Antigua and Barbuda since March of last year, racking up maintenance and other costs of about $112,000 a month. The 81-meter, $81 million yacht (that’s a million dollars a meter) is believed to be owned by Andrey Guryev, a fertilizer magnate, but he denies it and says he only uses (or used) the boat every now and then.

The government of Antigua and Barbuda thus determined the yacht had been abandoned and the country’s Minister of Justice and attorney general declared the boat was “a hazard to shipping and to the harbor where it is moored.” It thus sought to have the yacht auctioned off.

In May, the US government granted a license to allow the Antiguan government to do just that. More than twenty bids have already come in for the yacht, even though the exact timing of the auction has not been determined. Local reports say the bidders, as well, had to seek licenses from the US Treasury to allow them to participate in the auction. This would allow authorities to do due diligence and ensure the oligarch is not simply buying his boat back.

This became an issue in the auction of a different Russian yacht, the $75 million dollar Axioma, which was seized last year by JP Morgan. The bank claimed the yacht’s owner, Dmitry Pumpyansky, had defaulted on a loan. It auctioned the vessel off in September for $37.5 million, among rumors that the Turkish buyer planned to bring it back to Turkey and possibly sell it back to Pumpyansky. The rumor has not been confirmed, but the yacht is now in Turkey and its builder, Dunya Yachts, is currently building a support yacht for Axioma.

In the meantime, as Alfa Nero awaits its auction, her crew has shrunk from 44 to six. Those last hangers-on have been killing time playing Call of Duty in the master cabin and swimming in the yacht’s infinity pool.

Alexey Kuzmichev, the founder of Alfa Group and LetterOne, did manage to free his two yachts, La Petite Ourse and La Petite Ourse II, which French authorities had seized. While these yachts are less ostentatious as many of the megayachts we’ve focused on, they are still worth a few million dollars each.

Similar to the case involving Usmanov and Dilbar, French courts determined French officials did not follow proper procedure in detaining the yachts. The rulings granted Kuzmichev the right to use the vessels, but only in French territorial waters, while authorities continue with their investigation.

Practically speaking, Kuzmichev still cannot access his yachts, since he is sanctioned in Europe and cannot travel to France. But that doesn’t mean his friends and family cannot take the boats out for a spin. Additionally, the court ordered the French state to pay him 10,000 euros.

The fight over the yacht Amore Vero is also playing out in French courts. The $120 million yacht was one of the first captured in the frenzy of seizing oligarch assets last year. It is believed to be owned by Igor Sechin, chairman of Rosneft. Last June a lawyer representing the company that owns the yacht claimed the legal measure used to seize it was unlawful. The judge in that matter declared, months later, that he was not the right judge to make the decision, and he kicked it to a different tribunal in Marseille. It is unclear where that legal matter currently stands. However, the yacht’s lawyer recently told Le Figaro that French authorities seized the vessel for political, rather than legal, reasons, suggesting that in the end, the fate of Amore Vero will be decided between the Elysee Palace and the Kremlin.

The Tango (right), seized in Barcelona in 2022 (Maarten Visser)

Lastly, there is Tango, Viktor Vekselberg’s yacht, which Spanish authorities seized on behalf of the United States. Earlier this year, the US Department of Justice unsealed indictments of Richard Masters and Vladislov Osipov, claiming the two had helped Vekselberg evade sanctions. Masters runs a yacht maintenance company in Mallorca, and Osipov allegedly helped set up shell companies to help Masters hide the movement of money related to the yacht.

Masters was arrested by Spanish officials, but released in Madrid after having his passport confiscated. He must check in with authorities every two weeks and the United States is working on his extradition. An arrest warrant has been issued for Osipov, a Russian-Swiss citizen.

In the meantime, Tango remains docked in Palma de Mallorca, with the US government paying her bills.