Accused money launderers left a path of bankrupt factories(newsinteractive.post-gazette.com)
newsinteractive.post-gazette.com
Accused money launderers left a path of bankrupt factories
https://newsinteractive.post-gazette.com/ukraine-money-laundering/
121 comments
It's not just 'post Soviet' it's also 'current Rest of World'.
Business outside of 'established rich places' may often include huge sums for bribery and that money comes back in many ways, including 'very expensive real estate in NY / London' etc. and Dubai is becoming a major centre of such activity. [1]
The question is, how long can Dubai balance it's claims to legitimacy and integrity, while at the same time looking the other way? Will nascent powers like India and China even care? It's going to be an interesting next 50 years.
[1] https://www.transparency.org/en/news/the-united-arab-emirate...
Business outside of 'established rich places' may often include huge sums for bribery and that money comes back in many ways, including 'very expensive real estate in NY / London' etc. and Dubai is becoming a major centre of such activity. [1]
The question is, how long can Dubai balance it's claims to legitimacy and integrity, while at the same time looking the other way? Will nascent powers like India and China even care? It's going to be an interesting next 50 years.
[1] https://www.transparency.org/en/news/the-united-arab-emirate...
> The worrying thing is that the West gave international legitimacy to these wealthy elites, while only pointing fingers at the endemic corruption in their countries.
The whole Western commitment to anticorruption is on display on Mayfair street in London.
The whole Western commitment to anticorruption is on display on Mayfair street in London.
Oh, you mean the part of town where an apartment is so expensive that it is out of reach even to London bankers?
Can give some more context about this situation? A web search didn't find the obvious answer, other than it was an expensive area.
It's like a half of Russian mafia owns mansions there, right in the open, laughing in the face of UK courts, and its money laundering laws.
>an expensive area
This is a bit of an understatement. If Mayfair is not the most expensive neighborhood in the world, it's close. A large number of the residents of Mayfair are former soviet state security who became oligarchs with the money to live there by pillaging their country then funneling that cash to the west with the aid of western banks including British banks.
This is a bit of an understatement. If Mayfair is not the most expensive neighborhood in the world, it's close. A large number of the residents of Mayfair are former soviet state security who became oligarchs with the money to live there by pillaging their country then funneling that cash to the west with the aid of western banks including British banks.
[deleted]
That's not so different from how the European noble families established their privileged positions centuries ago. It's just that they were military leaders rather than state security officers.
> Everything from banks through insurance companies through delivery companies to media groups is owned by people formerly involved with state security.
Not the case with Kolomoisky, who was not involved with state security. Generally, Ukrainian oligarchs do not come from state security background.
Not the case with Kolomoisky, who was not involved with state security. Generally, Ukrainian oligarchs do not come from state security background.
From a Bulgarian perspective what I’ve said holds true. The oligarchs themselves were often picked from prominent nomenklatura families and in spite of not having a background as state security officers, were largely kept responsible for their actions by them. The state security officers had all the information about trade routes, information about all state enterprises and their financial status, etc.
or having relatives to BKP
Russian oligarchs generally don't come from state security background either. I don't where the OP got that from.
It seems that he was referring to the Bulgarian oligarchs. Some of the early ones were part of the security services or were married to a family members who were involved in security.
[1] https://en.wikipedia.org/wiki/Ilia_Pavlov
[1] https://en.wikipedia.org/wiki/Ilia_Pavlov
Wasn't Kolomoisky one of the oligarchs that backed the overthrow of the previous pro-Russian government as well as financed the current president of Ukraine? I am wondering what went wrong for him with the US, was it just Trump in power instead of a more friendly politician?
It seems like this scheme was unraveling before Trump came into office. If it hadn't been, Trump may have proved to be good for him, in driving renewed optimism for domestic steel production and simultaneously stripping regulatory bodies like the EPA of oversight and enforcement capacity.
That this scheme was even considered seems like a more general enddictment of the history of US corporate and industrial regulatory oversight... Just put it on the wall next to the SEC and Wall Street, with highlights on Bernie Madoff and the subprime mortgage crisis.
That this scheme was even considered seems like a more general enddictment of the history of US corporate and industrial regulatory oversight... Just put it on the wall next to the SEC and Wall Street, with highlights on Bernie Madoff and the subprime mortgage crisis.
> Generally, Ukrainian oligarchs do not come from state security background.
Kolomoyskyi is just a smart shark without security or criminal background, Akhmetov has criminal background (Donetsk region), Pinchuk is related to former President Kuchma (indirect Communist party background), Poroshenko has Communist party background, Firtash is a frontman for criminal organization (mastermind fled from Hungary to Moscow).
Kolomoyskyi is just a smart shark without security or criminal background, Akhmetov has criminal background (Donetsk region), Pinchuk is related to former President Kuchma (indirect Communist party background), Poroshenko has Communist party background, Firtash is a frontman for criminal organization (mastermind fled from Hungary to Moscow).
>>Everything from banks through insurance companies through delivery companies to media groups is owned by people formerly involved with state security.
Carry over from the massive corruption created from handing control over the entire population to the state bureaucracy, in the name of creating a non-exploitive communist economy.
Carry over from the massive corruption created from handing control over the entire population to the state bureaucracy, in the name of creating a non-exploitive communist economy.
The West gave legitimacy to this because it's own elites do the same thing with monopoly enterprises. Microsoft did it with OSs, Google with search, Telecoms expanding from wired phones, to wireless, now to entertainment media ownership, etc... Though perhaps the private equity companies come closest to the methods of operation described in the article.
> The worrying thing is that the West gave international legitimacy to these wealthy elites, while only pointing fingers at the endemic corruption in their countries.
Wouldn't it be quite difficult to prevent foreign money being laundered in some other country? I would guess verifying whether the money is legit coming from some weird foreign jurisdictions is probably quite difficult. The only way to work around that would probably reject all customers who are sending money from there.
Wouldn't it be quite difficult to prevent foreign money being laundered in some other country? I would guess verifying whether the money is legit coming from some weird foreign jurisdictions is probably quite difficult. The only way to work around that would probably reject all customers who are sending money from there.
Those oligarchs are a tiny minority of the country population and their international financial endeavours are almost always tracked by Western intelligence agencies, but the pragmatic interest of the West is to welcome that money. They buy the most expensive real estate in London without even negotiating, send their kids to elite schools, buy their wifes jewellery at outrageous prices.
This. And the problem I've found is whenever anyone gets to a position that could legitimately deal with this issue, they become either compromised or they become involved themselves in the situation.
Basically there's another very rich black market that won't be stopped easily.
Basically there's another very rich black market that won't be stopped easily.
>And the problem I've found is whenever anyone gets to a position that could legitimately deal with this issue, they become either compromised or they become involved themselves
In Post Soviet Countries challenging the Oligarchs is like asking for a death sentence. What is required is a Western effort to go after these Crooks helping the elected Government to implement a system that can be trusted.
In Post Soviet Countries challenging the Oligarchs is like asking for a death sentence. What is required is a Western effort to go after these Crooks helping the elected Government to implement a system that can be trusted.
All what it takes is to digitize the whole infrastructure and make transparent all the public spending with details of details of the details all the way down to where the money currently is, all that is including large loans. Public spending? No privacy whatsoever, no hidden transactions nor business trading behind curtains. Oligarchs buy popular support as well, they own televisions themselves to manipulate local politics, but with detailed accounting all that could potentially be stopped. Of course the efforts to implement these would be gargantuan because they would fight back.
As a software dev in one of the Ex soviet block countries, I’ve heard several tales of accounting software projects being canceled because they would reveal inconvenient truths.
A good friend of mine once worked for a small software shop that was building some accounting software for power plants. When the project was almost done, the mafia guys in charge were reviewing it. The realized that if it was actually used, it would be waaay to revealing. The project got canceled immediately. With a clause to “stay quiet or else”...
And a couple of years back the government was trying to “crack down” on the gray economy. They released an app, that you could scan a receipt (from grocery shops, restaurants, everywhere really) and verify that the establishment has indeed paid its tax and has registered the transaction with the tax office.
However people “in the know” got access to a special api. When the verification is taking place there is actually a web hook being sent, which you can register for. And pay your tax “on demand” only when someone actually wants to verify it.
As far as I am aware this system is still in place today... Though its too esoteric to explain to the public so nobody really cares it seams. The public is like “sure government is crooked, like what else is new” :(
A good friend of mine once worked for a small software shop that was building some accounting software for power plants. When the project was almost done, the mafia guys in charge were reviewing it. The realized that if it was actually used, it would be waaay to revealing. The project got canceled immediately. With a clause to “stay quiet or else”...
And a couple of years back the government was trying to “crack down” on the gray economy. They released an app, that you could scan a receipt (from grocery shops, restaurants, everywhere really) and verify that the establishment has indeed paid its tax and has registered the transaction with the tax office.
However people “in the know” got access to a special api. When the verification is taking place there is actually a web hook being sent, which you can register for. And pay your tax “on demand” only when someone actually wants to verify it.
As far as I am aware this system is still in place today... Though its too esoteric to explain to the public so nobody really cares it seams. The public is like “sure government is crooked, like what else is new” :(
> digitize the whole infrastructure and make transparent all the public spending with details of details of the details all the way down to where the money currently is, all that is including large loans.
This is a use case for Bitcoin/crypto I hadn’t previously thought of. The public auditability is exactly the reason I don’t think it’s good for citizen use cases, but it seems perfect for government use cases. There’s an issue of how revenues get accurately added to the ledger, but tying a transaction to say an ID generated when a return is submitted would make it possible to track one’s own payment.
This is a use case for Bitcoin/crypto I hadn’t previously thought of. The public auditability is exactly the reason I don’t think it’s good for citizen use cases, but it seems perfect for government use cases. There’s an issue of how revenues get accurately added to the ledger, but tying a transaction to say an ID generated when a return is submitted would make it possible to track one’s own payment.
I don't think the problem is that people don't know _who_ the problem is.
People know who the problem is.
The thing is, if you want to do something about them, you're going to need to use a lot of violence - because those people will happily use violence against you.
Most people aren't interested in a starting a war, and would rather keep their heads down, and mind their own business.
The thing is, if you want to do something about them, you're going to need to use a lot of violence - because those people will happily use violence against you.
Most people aren't interested in a starting a war, and would rather keep their heads down, and mind their own business.
That and the historic evidence that the prize for all that bloodshed is just a new set of oligarchs.
You’d be surprised how much manipulation is taking place through local television and even social media. Local support is needed for elections, different politicians threat their existence..
No western country would do anything that helps solving the problem because they benefit from the situation.
Greatly informative piece about shady characters laundering money in the US at a pretty large scale by investing in, or outright buying, struggling US businesses such as steel mills.
Managers and employees think they're getting a lifeline. In reality they're getting a new owner who cares very little about the long-term health of the operation and the safety and well-being of its employees.
The new owner will use financial engineering to extract as much cash as possible while cutting capital expenditures as much as possible. Eventually, the business will have no choice but to file for bankruptcy. Along the way, all cash paid out of the business will have been legitimized.
Employees and towns suffer the consequences. Ugly and sad.
Managers and employees think they're getting a lifeline. In reality they're getting a new owner who cares very little about the long-term health of the operation and the safety and well-being of its employees.
The new owner will use financial engineering to extract as much cash as possible while cutting capital expenditures as much as possible. Eventually, the business will have no choice but to file for bankruptcy. Along the way, all cash paid out of the business will have been legitimized.
Employees and towns suffer the consequences. Ugly and sad.
So, if they're from a former soviet republic, we call they shady characters and the process money laundering; if they're from the US, we call them private capital and the process leveraged buyout.
That’s why they set up the British Virgin Islands private equity fund
Because it is indistinguishable
UK territories (or whatever you want to call them) don't have the geopolitical baggage that larger economic unions do, so they are good intermediaries with laws that are more relevant for business in the 21st century
Because it is indistinguishable
UK territories (or whatever you want to call them) don't have the geopolitical baggage that larger economic unions do, so they are good intermediaries with laws that are more relevant for business in the 21st century
I wonder how nations will react to such abuse going forward now that UK is no longer in EU. It should be pretty straightforward now for countries to outright ban any investment or cash flow from UK based entities. Nobody's now going to protect UK from such actions like EU membership could have.
Of course the counter is these UK territories will be too useful for the corrupt politicians for them to want to ban.... Much like Switzerland.
Of course the counter is these UK territories will be too useful for the corrupt politicians for them to want to ban.... Much like Switzerland.
I don't understand why thr UK leaving the EU would matter. The UK's position in the world of global banking before and after the EU hasn't changed. Banning all UK entities would kill the global economy.
> I don't understand why the UK leaving the EU would matter.
If a country pisses off the EU, for example by applying sanctions to one of its member states, the EU can reply "fine, we won't trade with you". This is a credible threat because the EU has a large share of the world economy.
The UK could also threaten to not trade with a country, but this is a much smaller threat as the UK is a much smaller part of the world economy.
In geopolitics, size matters: https://pontifex.substack.com/p/why-scotland-should-leave-th...
If a country pisses off the EU, for example by applying sanctions to one of its member states, the EU can reply "fine, we won't trade with you". This is a credible threat because the EU has a large share of the world economy.
The UK could also threaten to not trade with a country, but this is a much smaller threat as the UK is a much smaller part of the world economy.
In geopolitics, size matters: https://pontifex.substack.com/p/why-scotland-should-leave-th...
China has a bigger market than the EU. Does China have more power? I would say China has less influence. Marketsize matters but it is only one of many factors.
Remember the British Commonwealth is quite large with Canada, Australia, India, South Africa, etc. These create special relationships that don't exist with the EU.
Banning all UK entities, means cutting off all of the Hong Kong relationships, many commonwealth relationships, anglo countries.
As important as the EU relationship is. The Anglo alliance of countries holds the true power and it has been this way since WWII.
Remember the British Commonwealth is quite large with Canada, Australia, India, South Africa, etc. These create special relationships that don't exist with the EU.
Banning all UK entities, means cutting off all of the Hong Kong relationships, many commonwealth relationships, anglo countries.
As important as the EU relationship is. The Anglo alliance of countries holds the true power and it has been this way since WWII.
> Banning all UK entities would kill the global economy.
I wonder which of these "too big to fail" statements will end up being the one that actually kills the global economy.
I wonder which of these "too big to fail" statements will end up being the one that actually kills the global economy.
Banks moved a lot of operations from London to Frankfurt due to Brexit.
Hostile takeover > leveraged buyout > private equity. They keep changing the name once people catch on to what a dirty business it is.
Money laundering means the money was illegally obtained. In this case it was allegedly stolen from a bank. It doesn't matter who steals or launders it for the definition.
To begin with, investment money were stolen from the largest Ukrainian bank via fake loans and investments. Hence the laundering. But instead of fake car wash sessions there were "for show" acquisitions: invest own money, quickly siphone them out of the business, sometimes but not necessarily making profit if lucky.
Yes and Russian billionaires are “oligarchs” while American billionaires are “businessmen”.
https://fair.org/home/russia-has-oligarchs-the-us-has-busine...
https://fair.org/home/russia-has-oligarchs-the-us-has-busine...
>Mr. Kolomoisky, 58, a mercurial figure in Ukraine who once funded his own militia to fend off pro-Russian insurgents
the scope and type of available power is what distinguishes oligarchs from mere rich businessmen. In that particular case the Kolomoisky dukedom happened to be right next to the insurgency and he, like it were the actual feudal times, had to "raise the fyrd" so to speak to protect his dukedom and the whole kingdom by extension - his forces were among the key ones who blocked the insurgency from expanding further in the first months when the Ukrainian state and army were kind of in disarray.
the scope and type of available power is what distinguishes oligarchs from mere rich businessmen. In that particular case the Kolomoisky dukedom happened to be right next to the insurgency and he, like it were the actual feudal times, had to "raise the fyrd" so to speak to protect his dukedom and the whole kingdom by extension - his forces were among the key ones who blocked the insurgency from expanding further in the first months when the Ukrainian state and army were kind of in disarray.
That's available to Jeff Bezos, he just doesn't need it right now. I guarantee you if militants were blowing up Amazon trucks regularly, and the US government was ineffective to stop it, there would be Amazon MRAPs patrolling the streets
Yes, and at a small scale it already happens today. I was working for a largish tech firm a few years ago when they made an agreement with the local and state government to get the right to run their own private police force on their campus. This was not security, they had (limited) rights to detain, arrest, and use deadly force in some cases, very similar to American university police if you're familiar with that.
Are you sure things are so different?
https://www.nationofchange.org/2016/11/01/security-firm-runn...
https://www.nationofchange.org/2016/11/01/security-firm-runn...
Very true. One launders money when the money is dirty. Money laundering requires placement of "raw cash", which is dirty. In this particular cash, the source of money is NOT "raw cash". Sure, Ihor took loans with the intention of not paying it back. This money is a product of corruption--not "dirty" though.
Imagine someone buying a new BMW M5 car on finance. Later, this guy claims that his car got stolen, gets a check from the Insurance company. Further, he uses this money as a down payment to buy a home in Texas. Do we call this "laundering"? I don't think so, since this money is traceable; neither placement, nor layering is involved. Yes, he schemed with his buddies to have his new car stolen, taken to Mexico. He can be prosecuted for his involvement in the theft, not for "money laundering".
Imagine someone buying a new BMW M5 car on finance. Later, this guy claims that his car got stolen, gets a check from the Insurance company. Further, he uses this money as a down payment to buy a home in Texas. Do we call this "laundering"? I don't think so, since this money is traceable; neither placement, nor layering is involved. Yes, he schemed with his buddies to have his new car stolen, taken to Mexico. He can be prosecuted for his involvement in the theft, not for "money laundering".
It doesn’t need to be cash for it to be laundered money; the act of moving dirty funds around to difficult its tracing is also laundering.
Right, because PE launders money.
I would guess that if you are laundering money, launderer would happily spend extra money on safety and other issues to prevent getting too much attention. Here the case sounds like if the laundering oligarch hadn't been stingy on those things he wouldn't have gotten caught.
Maybe this is happening already and we don't know because some other oligarch is not being stingy?
Welcome to London.
Welcome to London.
of course it is happening
people think “money laundering” is hard or impossible and will point to articles like this one as “see they got caught”
it is completely unfalsifiable when the reality is that money is fungible and it is a complete waste of resources to try to enforce a whitelist
it isn't necessary to have no evidence of the money, but that is also possible too but wasnt necessary here or in most areas of reintegration
the whole economy has practically no separation from licit and illicit sources and they routinely traverse back and forth
people think “money laundering” is hard or impossible and will point to articles like this one as “see they got caught”
it is completely unfalsifiable when the reality is that money is fungible and it is a complete waste of resources to try to enforce a whitelist
it isn't necessary to have no evidence of the money, but that is also possible too but wasnt necessary here or in most areas of reintegration
the whole economy has practically no separation from licit and illicit sources and they routinely traverse back and forth
Money laundering is my favorite curiosity. The amount of resources needed to keep control of something like that would be astronomical.
Might happen eventually if governments move to centralized digital currencies though.
I think it’s a crime that attracts folks of all kinds. It’s a good business, you don’t “hurt” anyone besides the government, very quiet, sex, money, etc. The bad shit is where the money comes from.
Might happen eventually if governments move to centralized digital currencies though.
I think it’s a crime that attracts folks of all kinds. It’s a good business, you don’t “hurt” anyone besides the government, very quiet, sex, money, etc. The bad shit is where the money comes from.
That's why central banks start working on crypto and China even plans to introduce money with expiry date.
Or the money was spent in buying the factory and what happens after is just extraction.
Speculation being that investments in economy are perceived as a very good thing and the origin of the money is not checked that tightly.
Speculation being that investments in economy are perceived as a very good thing and the origin of the money is not checked that tightly.
Canada has a huge money laundering problem (source: my company makes anti money laundering tech).
Interesting how the article shows how this translates to destruction of capital assets and, eventually, people. That’s not necessarily clear otherwise.
Interesting how the article shows how this translates to destruction of capital assets and, eventually, people. That’s not necessarily clear otherwise.
I don't know about Canadian laws, but in the United States we let foreigners buy real estate with a phone call, or email.
So basically we let foreigners buy our land.
They can't live in the house/building, but they control the people whom do.
We make it difficult for hard working Americans to buy a home, but let foreigners scoop it up with funny money?
This has bothered me for years. Especially when it's not easy for Americans to buy foreign land.
(Supposedly the government asks about the origin of the wealth before the sale now, but in my county (Marin County) it looks fishy. I have neighbors who don't speak a lick of english, but are living in mansions. My gripe isn't cultural. I just have doubts on the origin of the cash they buy houses/land/buildings with.)
So basically we let foreigners buy our land.
They can't live in the house/building, but they control the people whom do.
We make it difficult for hard working Americans to buy a home, but let foreigners scoop it up with funny money?
This has bothered me for years. Especially when it's not easy for Americans to buy foreign land.
(Supposedly the government asks about the origin of the wealth before the sale now, but in my county (Marin County) it looks fishy. I have neighbors who don't speak a lick of english, but are living in mansions. My gripe isn't cultural. I just have doubts on the origin of the cash they buy houses/land/buildings with.)
If you’re buying land in the US with a phone call or email, you are probably dealing with sufficient money to acquire an EB-5 Visa, so they can live in the US.
Although, they did just increase investment amounts to $1.8M (and $900k for economically disadvantaged areas) from $1M/$500k, so the bar did get higher.
https://www.uscis.gov/working-in-the-united-states/permanent...
Although, they did just increase investment amounts to $1.8M (and $900k for economically disadvantaged areas) from $1M/$500k, so the bar did get higher.
https://www.uscis.gov/working-in-the-united-states/permanent...
If you live in Marin homes aren't expensive because of foreigners. It's because Marin is full of ravenous NIMBYs who haven't allowed any homes to be built since 1970.
Especially "foreigners are buying homes to leave them vacant" is not a real thing - that does nothing except lose them money.
Especially "foreigners are buying homes to leave them vacant" is not a real thing - that does nothing except lose them money.
For the former, it could be both.
Gold is valuable because you can't just survey and frame up more of it. And real estate starts functioning like that when you can't survey and frame up more in an area.
A vacant home has made good money in any desirable area, for the past 10 years anyway.
Gold is valuable because you can't just survey and frame up more of it. And real estate starts functioning like that when you can't survey and frame up more in an area.
A vacant home has made good money in any desirable area, for the past 10 years anyway.
Isn't there like 30% immediate tax that is required to be withheld by the agent and then later buyer is responsible to file a return to attempt to get that money back? I am sure some do, but for the rest - it looks like it is a price paid to the USA for the privilege of owning real estate there.
Local LLC owned by an offshore corp. Buy/sell the offshore corp, ergo no change in an US ownerships and poof, no withholdings. Actually, I think you can skip the LLC part.
That becomes an issue if you want to later sell to a local, but if it's unaffordable to locals, who cares.
Might be a non-issue if there's a tax-treaty reduction on withholding if the US was dumb enough to sign one with a tax haven (Canada does with Barbados and Bermuda) and you form the corp there.
Not a lawyer/US resident/citizen.
That becomes an issue if you want to later sell to a local, but if it's unaffordable to locals, who cares.
Might be a non-issue if there's a tax-treaty reduction on withholding if the US was dumb enough to sign one with a tax haven (Canada does with Barbados and Bermuda) and you form the corp there.
Not a lawyer/US resident/citizen.
The missing simple description in the article is:
Launderers with tainted money buy struggling businesses that have large assets as collateral for loans, and then walk away with the loan. It leaves the bank holding the asset to be sold off.
From the launderer's value at risk perspective, $10m in dirty money is worth probably $5m or less clean, because if you taxed that $10m and did all the fees, and then there is the risk of being caught for the crime that generated it, 50% free and clear seems pretty good.
The more I learn about the investment business, the more I think it's like crime without the violence. The money laundering problem in Canada is most obvious by the oversupply of certain retail businesses, but there are other scams I see on investment prospectuses more often than seems normal. The two problems I think is a lot of the launderers are politically connected, so there is no scrutiny, and even if leadership did something, it would only be to put even more of a burden on law abiding businesses.
Imo, complex laws and regulations only affect the people who follow them, and they reward corruption.
Launderers with tainted money buy struggling businesses that have large assets as collateral for loans, and then walk away with the loan. It leaves the bank holding the asset to be sold off.
From the launderer's value at risk perspective, $10m in dirty money is worth probably $5m or less clean, because if you taxed that $10m and did all the fees, and then there is the risk of being caught for the crime that generated it, 50% free and clear seems pretty good.
The more I learn about the investment business, the more I think it's like crime without the violence. The money laundering problem in Canada is most obvious by the oversupply of certain retail businesses, but there are other scams I see on investment prospectuses more often than seems normal. The two problems I think is a lot of the launderers are politically connected, so there is no scrutiny, and even if leadership did something, it would only be to put even more of a burden on law abiding businesses.
Imo, complex laws and regulations only affect the people who follow them, and they reward corruption.
Probably all wealthy countries are big destinations for dirty money. Wouldnt make sense to bring dirty money to poor country because there it would attract more attention.
Great read! Aside from software development, I run a metal fabrication shop where we purchase and process approx. 20k lbs of steel and aluminum (monthly). Having been in the industry for the past 10 years, I’ve always referred to all metal suppliers as folks that deal with “funny money”. There’s no transparency in pricing whatsoever. You can’t easily lookup or guesstimate metals prices without having core subject matter expertise that come with experience. It might as well be called an undercover hedge fund market with killer profits!
Isn't the markup for a certain product basically it's weight times the spot market price of the metal with an added constant markup depending on how much more complex it is than a lump of ore? I have no idea what I'm talking about but am interested.. Please elaborate!
The metal market I go to generally uses prices per pound for the basic shapes of different metal types, and the system lists pounds per piece. But this information isn’t readily available, it’s only after your purchase when you get an invoice that you can see what the cost is. Otherwise you have to stand at the counter and ask how much each different piece is.
All the metal merchants I deal with here in Australia will issue quotes upon request, usually replying within an hour via email or immediately on the phone.
Prices are typically very stable, and they will notify of predicted significant price changes months in advance. We got notifications late last year of predicted price changes throughout the first half of 2021.
Prices are typically very stable, and they will notify of predicted significant price changes months in advance. We got notifications late last year of predicted price changes throughout the first half of 2021.
Additionally, there is the additional dimensions of grade/composition of metal, heat treating (and heat treatability), dimensional stability/accuracy, and finish (pickled? Oiled? Mill finish?). And that’s just for ferrous. Non-ferrous is even weirder in many ways.
Could you elaborate a bit more? I've always been interested in the buying/selling of metal.
Matt Levine's jokes about the aluminum merry-go-round suddenly acquire another dimension.
Are you getting better prices on feedstock as automobile production slows?
Metalshub is working on this
Is it only me or is Cyprus and Ukraine in the wrong spot on the map about a quarter down? Nitpicking but Cyprus is not in China and Ukraine is not Mongolia.
I see an animation where they start in the right place, but then the focus countries zoom in, while the world map remains the same, putting them in Asia. The should probably have faded out the world map when zooming in.
Can you share a picture? The map is fine on mine.
Ok, that explains it... I'm on 5:4 screen... they made it for widescreen! :D
[deleted]
This is hard to follow.
Were the factories profitable? If not seems like the money benifited the employees. Looks like the front line employees got hurt and the community but every other employee made off with dirty money.
Were the factories profitable? If not seems like the money benifited the employees. Looks like the front line employees got hurt and the community but every other employee made off with dirty money.
The factories (and businesses) are used as collateral to get loans from banks. The banks are getting defrauded when the company goes bankrupt and the loan isn’t repaid. The injured workers are collateral damage.
If they got away with it then it would just look like a normal bankruptcy. Extracting the money already happened with more or less legitimate-looking business expenses.
If they got away with it then it would just look like a normal bankruptcy. Extracting the money already happened with more or less legitimate-looking business expenses.
I would love to see dollar values or ratios and the timing on this type of scheme.
If they pay $80 million in "cash" for a steel plant and then turn around and ask a legitimate bank for a loan with the plant as collateral, how much can they realistically get for the loan? Any amount is going to be a lot and the lender is assuming that risk, so one would think that due diligence would consider the unique depreciation that could occur in an asset that requires massive maintenance inputs to maintain sustainable operability and hold it's capital value, and that they would build in some contractual mechanism to monitor the value of the asset and enforce it's upkeep.
Even a car dealerships does this with leased vehicles to ensure that the value of the car they get back at the end of the lease matches their projections closely enough that they can sell it off again.
If they pay $80 million in "cash" for a steel plant and then turn around and ask a legitimate bank for a loan with the plant as collateral, how much can they realistically get for the loan? Any amount is going to be a lot and the lender is assuming that risk, so one would think that due diligence would consider the unique depreciation that could occur in an asset that requires massive maintenance inputs to maintain sustainable operability and hold it's capital value, and that they would build in some contractual mechanism to monitor the value of the asset and enforce it's upkeep.
Even a car dealerships does this with leased vehicles to ensure that the value of the car they get back at the end of the lease matches their projections closely enough that they can sell it off again.
When laundering money, "clean" money is worth more to them than "dirty" money, so substantial losses would be part of the plan.
And yes, banks try not to be defrauded. "Due diligence" is about catching problems like this or at least reducing them to manageable levels.
But I don't know the details; I just read a book about fraud.
And yes, banks try not to be defrauded. "Due diligence" is about catching problems like this or at least reducing them to manageable levels.
But I don't know the details; I just read a book about fraud.
> The factories (and businesses) are used as collateral to get loans from banks. The banks are getting defrauded when the company goes bankrupt and the loan isn’t repaid.
Defrauded? This is the entire concept of collateral.
Defrauded? This is the entire concept of collateral.
Not when the book value of the collateral bears as much resemblance to reality as that Spanish old lady’s shoddy restoration job of that Jesus fresco.
It’s the bank’s job to do proper due diligence and perform a good appraisal.
But here the banks are controlled by the people committing the fraud, presumably they are defrauding the borrowers (the books were $5.5 billion short).
Yes, and preventing fraud is why they do that, and sometimes, the due diligence isn't good enough.
In this case, though, apparently the bank was in on it.
In this case, though, apparently the bank was in on it.
The scheme Ihor Kolomoisky perpetrated is very popular in the third world countries. In India, for instance, many politicians and industrialists take loans worth hundreds of millions of dollars from the public banks for their supposed projects, then funnel the loan funds to their personal coffers. Years down the line, these public banks add these unpaid loans as "non performing assets". The same public banks are very reluctant to lend money to the average guy.
Those probably aren't loans, they're semi-hidden bribes.
It sounds more like a scheme to defraud banks.
An actual business with a factory is going to look like pretty good collateral to a bank making a loan, but the bank loses money on the loan when the company goes bankrupt. It’s not in the bank’s interest to do this. But bank employees could’ve been bribed, sure.
So this sounds like a form of “long firm fraud” or maybe “control fraud.” For more about it, I recommend reading Lying for Money: How Legendary Frauds Reveal the Workings of Our World.
(Not that I’m an expert; I just read a book.)
An actual business with a factory is going to look like pretty good collateral to a bank making a loan, but the bank loses money on the loan when the company goes bankrupt. It’s not in the bank’s interest to do this. But bank employees could’ve been bribed, sure.
So this sounds like a form of “long firm fraud” or maybe “control fraud.” For more about it, I recommend reading Lying for Money: How Legendary Frauds Reveal the Workings of Our World.
(Not that I’m an expert; I just read a book.)
I think gp's saying that the banks are in on it. ie. they knew in advance that the loan was going to go bad, but that was fine to them because they saw as a price of gaining favor (bribe).
If the money comes from the bank, it's hard to see how the bank (as a company) benefits from it. Maybe by selling the loan?
You're over thinking it. Stock in the these banks are majority held by the Governments and the rest largely by individuals/mutual funds/pension funds. So when these loans become "non-performing", the people left holding the bag are the common tax-payers. This is simply a less easily detectable way of stealing public money and usually there's some under the table incentives to the individual bankers approving this stuff, together with threat of political strong arm if not.
Awarding government contracts to companies owned by relatives and political allies is another way though that's more easily detected.
Awarding government contracts to companies owned by relatives and political allies is another way though that's more easily detected.
Indian banks are public, government owns majority share in them. It's ultimately the government shareholders and general public who loses when tons of loan suddenly go NPA.
As someone whoes family is in banking, it's not a low level employees at bank who is bribed. High level executive at a bank is pressured into passing a loan for a project which otherwise wouldn't pass bank's strict loan approval in return sometimes the high level executive will be offered financial favours when he would have retired
Sometimes the high level executive would have sent his son or daughter to US or UK for studies and suddenly they turn millionaire and banker claims they made good business there but infact it's the money laundered to UK from India, ending up in their foreign bank accounts
As someone whoes family is in banking, it's not a low level employees at bank who is bribed. High level executive at a bank is pressured into passing a loan for a project which otherwise wouldn't pass bank's strict loan approval in return sometimes the high level executive will be offered financial favours when he would have retired
Sometimes the high level executive would have sent his son or daughter to US or UK for studies and suddenly they turn millionaire and banker claims they made good business there but infact it's the money laundered to UK from India, ending up in their foreign bank accounts
Banks don't benefit from these schemes. Nor do they sell these loans to third parties either in bulk or in tranches. In India, major banks are partly owned by the government, even though these banks are listed on their stock exchanges.
So, it is a form of collusion between bank executives and powerful loanees. Who holds the bag? Usually the government in the Indian case: for instance, Indian govt has 61.23% ownership in State Bank of India, a large bank in India. In India, many politicians are also businessmen--real or fake; these people with dual masks (politician and businessman) are so good at scamming the govt, banks, public works contracts.
So, it is a form of collusion between bank executives and powerful loanees. Who holds the bag? Usually the government in the Indian case: for instance, Indian govt has 61.23% ownership in State Bank of India, a large bank in India. In India, many politicians are also businessmen--real or fake; these people with dual masks (politician and businessman) are so good at scamming the govt, banks, public works contracts.
It could be some sort of scheme where the politicians does some sort of favor for the bank, eg. expediting their paperwork, awarding them contracts. However, as the sibling commenter mentioned, it could also be that the bank executives are abusing their position and taking all the gains.
In case of Kolomoyski, he owned the bank he defrauded.
Today you don't need banks to make money as politician.
Modern scheme in India:
1. Get citizens excited about new infra projects using tons of advertisements, and propoganda YouTube channels
2. Open a tender for the project
3. Pass on the bids to your favourable "company"
4. Now this favourable company puts in the winning bid and wins
5. Favourable company sends money to the political party through electoral bond
6. favourable company which is now a contractor on infra projects is forced to accept subcontractors who are usually acting as fronts and belong to family members of the politicians. These subcontracting firms either outsource the real work or they get into brand/asset building with public money.
This scheme works really well as they are skeaming off 20% of the project budget through various contractor companies and general public has no way to figure out anything.
Modern scheme in India:
1. Get citizens excited about new infra projects using tons of advertisements, and propoganda YouTube channels
2. Open a tender for the project
3. Pass on the bids to your favourable "company"
4. Now this favourable company puts in the winning bid and wins
5. Favourable company sends money to the political party through electoral bond
6. favourable company which is now a contractor on infra projects is forced to accept subcontractors who are usually acting as fronts and belong to family members of the politicians. These subcontracting firms either outsource the real work or they get into brand/asset building with public money.
This scheme works really well as they are skeaming off 20% of the project budget through various contractor companies and general public has no way to figure out anything.
This percentage scheme is there forever. Even L&T IDPL has to pay kickbacks; here, L&T pays to Chief ministers, etc.
However, if one wants to pull off 2000 crores ($300M USD) scam, it is done through banks. Here are two recent examples from the state of Andhra Pradesh: 1. Rayapati Sambasiva Rao, Ex MP 8000 Cr (1B USD) 2. Sujana Chowdary, MP, 5700 Cr (750M USD)
Add scams that are in the range < 100M USD.
However, if one wants to pull off 2000 crores ($300M USD) scam, it is done through banks. Here are two recent examples from the state of Andhra Pradesh: 1. Rayapati Sambasiva Rao, Ex MP 8000 Cr (1B USD) 2. Sujana Chowdary, MP, 5700 Cr (750M USD)
Add scams that are in the range < 100M USD.
It's essentially embezzlement with complicity.
This is another reason why I like cryptocurrency, specifically bitcoin. These shenanigans are enabled at the core through the ability to print money via a central bank. The central bank is corrupt, they give money effectively straight to those connected, who use the new money to buy foreign assets as well as extremely complex schemes to loot their country. With a universal money unit that cannot be corrupted, you eliminate a lot of this nonsense.
I don't think BTC doesn't make the messy people problems any easier. That doesn't mean it's without value -- I do think there is some incompressible utility to having a globally decentralized "universal money unit" as you say. But that's no shortcut to curing socioeconomic corruption.
I wish there were more details on the kind of money they were able to pull out of this scheme. All of the dollar values in the article refer to the amounts stolen in Ukraine, moved through she'll companies, and used to purchase properties and businesses.
Traditionally, we hear about money laundering involving low-overhead, cash-oriented businesses where money can be injected and extracted by falsifying volume.
But these were large capital purchases into an industry in destress with numerous facets of regulatory exposure, from the industry's risk to the environment and the high potential safety risks for workers to the special status of the industry to national security - it invites scrutiny of lots of alphabet agencies, especially if your scheme involves ignoring all of their requirements to juice profits.
This leads me to believe the "masterminds" only ever saw it as a short-term play, so back to my original bewilderment, how much were they able to extract in just several years compared to the large upfront costs? And were they skimming so much from neglect that it wouldn't have been worth it just to run these as legitimate, sustainable businesses?
I wonder if the had just maintained these steel facilities and avoided the safety and environmental problems, and made it into Trump's presidency intact, would they have just been able to sell them off high on the back of Trump's protectionist, domestic steel revival rhetoric and made a killing and be sitting pretty today, given that all the legal pressure on them for this is from the US and they seem to have already been given a pass for stealing $5.5 billion in Ukraine from Ukraine.
Traditionally, we hear about money laundering involving low-overhead, cash-oriented businesses where money can be injected and extracted by falsifying volume.
But these were large capital purchases into an industry in destress with numerous facets of regulatory exposure, from the industry's risk to the environment and the high potential safety risks for workers to the special status of the industry to national security - it invites scrutiny of lots of alphabet agencies, especially if your scheme involves ignoring all of their requirements to juice profits.
This leads me to believe the "masterminds" only ever saw it as a short-term play, so back to my original bewilderment, how much were they able to extract in just several years compared to the large upfront costs? And were they skimming so much from neglect that it wouldn't have been worth it just to run these as legitimate, sustainable businesses?
I wonder if the had just maintained these steel facilities and avoided the safety and environmental problems, and made it into Trump's presidency intact, would they have just been able to sell them off high on the back of Trump's protectionist, domestic steel revival rhetoric and made a killing and be sitting pretty today, given that all the legal pressure on them for this is from the US and they seem to have already been given a pass for stealing $5.5 billion in Ukraine from Ukraine.
Other comments point to the scheme using the asset purchased with stolen money as collateral for a loan that the bank is left with in a much depreciated state. That would make the ongoing extraction of profits is irrelevant. My alternate set of questions about this loan fraud scheme are in a different comment. Ha.
And I don't really get how that "launders" the money trail. The only point at which the transfers of funds seem murky is when they go through the she'll companies in the BVI.
This feels like the makings of a great article that some editor said, "write up what you have, we're just going to publish it and move you onto something else." There are just so many things unexplained or unexplored.
And I don't really get how that "launders" the money trail. The only point at which the transfers of funds seem murky is when they go through the she'll companies in the BVI.
This feels like the makings of a great article that some editor said, "write up what you have, we're just going to publish it and move you onto something else." There are just so many things unexplained or unexplored.
This is somewhat unrelated to the story, but I am happy and proud of the Post-Gazette for digging into this. The PG is my hometown newspaper -- although I haven't lived in Pittsburgh for fifteen years, it's still home -- and they like most newspapers have been absolutely gutted by layoffs and piss-poor management. You might recall a controversy a few years ago about their firing of the political cartoonist because he refused to be pro-Trump as the owners wished.
Local news is critical for reasons I hope I don't need to explain here, as are investigative departments that dig in deep and uncover things like this. The PG (IIRC) got a Pulitzer for their work on the Penn State/Jerry Sandusky scandal some years back and it makes me proud to see them still doings like this, the Block family be damned.
Local news is critical for reasons I hope I don't need to explain here, as are investigative departments that dig in deep and uncover things like this. The PG (IIRC) got a Pulitzer for their work on the Penn State/Jerry Sandusky scandal some years back and it makes me proud to see them still doings like this, the Block family be damned.
This specific article is terribly written, however. I've spend over 5min trying to get the gist of the story. Which seems to be:
A business owner with a background in oil and metals asked the bank he owned to fund levereged-buy-outs of rundown US steel factories, some of which had accidents, some of which later shut down. DOJ and the prosecutors in Ukraine investigate if the schemes used in the process of take-over could be fraudulent.
This story has been covered many times, the unique bit is interviewing the steelworkers.
Which is exactly my point, the article and the clickbaity headline sound like a detailed report about a newly uncovered scheme, but there is actually very little information about what happened.
So is Ukraine basically the playground where all of the worlds corrupt elite steal millions?
I recall a certain person being hesitant to send US tax dollars there because of corruption concerns.
I recall a certain person being hesitant to send US tax dollars there because of corruption concerns.
I had a girlfriend that was from Ukraine and visited the country in summer.
Ukraine has probably the most fertile soil in the world. Like Egypt it has fed Europe and then Russia for a long time.
It is also one of the most corrupt countries in the world, like Russia and China.
Most Westerners just can not imagine what corruption is at those levels. For decades the grain was put into trains and half the grain had "disappeared" in destiny. This happens at all levels.
Nobody goes there to help the country. Like lots of countries in Africa the big guys (Russia or EU, or USA) go there to plunder the country. It is too rich and too strategic.
It is also the playground for big countries to fight. Instead of fighting WWIII and fucking the entire world with radioactive waste, the big guys play on playgrounds like Ukraine their power games.
The US does not want Europe to dismantle NATO after it is not necessary anymore where Europe can arm itself. It also does not want Europe and Asia to integrate further because that means the end of USA hegemony in the world.
Also the military industrial complex in the US needs a reason to exist. If threats do not exist, they will create them in order to survive or "their money" will be redirected to things like social welfare. Americans need to feel unsafe all the time so they agree to pay for new weapons in new taxes.
UE wants to expand to get the wealth of Ukraine resources and Russia does not want to lose them.
That is very bad for Ukraine. The people that can, like my ex girlfriend, just leave the country.
Ukraine has probably the most fertile soil in the world. Like Egypt it has fed Europe and then Russia for a long time.
It is also one of the most corrupt countries in the world, like Russia and China.
Most Westerners just can not imagine what corruption is at those levels. For decades the grain was put into trains and half the grain had "disappeared" in destiny. This happens at all levels.
Nobody goes there to help the country. Like lots of countries in Africa the big guys (Russia or EU, or USA) go there to plunder the country. It is too rich and too strategic.
It is also the playground for big countries to fight. Instead of fighting WWIII and fucking the entire world with radioactive waste, the big guys play on playgrounds like Ukraine their power games.
The US does not want Europe to dismantle NATO after it is not necessary anymore where Europe can arm itself. It also does not want Europe and Asia to integrate further because that means the end of USA hegemony in the world.
Also the military industrial complex in the US needs a reason to exist. If threats do not exist, they will create them in order to survive or "their money" will be redirected to things like social welfare. Americans need to feel unsafe all the time so they agree to pay for new weapons in new taxes.
UE wants to expand to get the wealth of Ukraine resources and Russia does not want to lose them.
That is very bad for Ukraine. The people that can, like my ex girlfriend, just leave the country.
> Americans need to feel unsafe all the time so they agree to pay for new weapons in new taxes.
When is the last time this happened?
When is the last time this happened?
> "I recall a certain person being hesitant to send US tax dollars there because of corruption concerns."
I think you meant IIRC, but the C is the problem. That certain person had no problem with corruption in Ukraine, it was just that he needed some of it's corruption to act in his favor first.
And the jump from the article to "So is Ukraine basically the playground where all of the worlds corrupt elite steal millions?" Is a little (not a little) broad. It's a former Soviet bloc state and this is pretty much table-stakes corruption for those.
I think you meant IIRC, but the C is the problem. That certain person had no problem with corruption in Ukraine, it was just that he needed some of it's corruption to act in his favor first.
And the jump from the article to "So is Ukraine basically the playground where all of the worlds corrupt elite steal millions?" Is a little (not a little) broad. It's a former Soviet bloc state and this is pretty much table-stakes corruption for those.
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How is one able to buy the factories using dirty money in the first place?
The worrying thing is that the West gave international legitimacy to these wealthy elites, while only pointing fingers at the endemic corruption in their countries.