A New York district prosecutor has frozen more than $20m of Manhattan property assets following allegations they were used to launder money for Russian criminals linked to a $230m fraud uncovered by dead whistleblower Sergei Magnitsky.
Preet Bharara, the US Attorney for the Southern District of New York, has filed a “civil forfeiture” complaint against nine companies that own $24m (£15m) of real estate, including “four luxury residential units and two high-end commercial spaces”. If the court upholds the complaint, the state would be able to seize the assets.
Mr Bharara said: “As alleged, a Russian criminal enterprise sought to launder some of its billions in ill-gotten rubles through the purchase of pricey Manhattan real estate. While New York is a world financial capital, it is not a safe haven for criminals seeking to hide their loot, no matter how and where their fraud took place.”
The court case is a major escalation in the ongoing diplomatic war between Russia and the US over Mr Magnitsky’s death and the fraud he uncovered. The former lawyer’s plight has become symbolic of state-backed corruption in Russia.
Mr Magnitsky discovered the $230m fraud against the Russian taxpayer in 2007 when working for UK-based hedge fund Hermitage Capital Management. But after going public with his findings, and naming policemen and other corrupt state officials, he was jailed. He died a year later in detention, having been refused medical attention after developing pancreatitis and being beaten. He was 37.
A campaign spearheaded by Hermitage resulted in 18 Russian’s linked to the death and fraud being barred from the US, the so-called Magnitsky List. In retaliation, the Kremlin (Berlin: KMLK.BE - news) banned Americans from adopting Russian orphans and drew up it’s own anti-Magnitsky list. Mr Bharara is on the Russian list.
The New York attorney’s case was put together with help from the Immigration and Customs Enforcement’s Homeland Security Investigations and Cyrus Vance Jr, the District Attorney for New York County.
Investigators followed the money trail from the fraud, tracking the suspect funds through several shell companies to Cyprus-based real estate firm, Prevezon. Prevezon and its subsidiaries are the owner of the frozen property assets, and the defendants in the attorney’s civil case.
The suit also names three Russians as the owners or directors of the Prevezon companies, one of whom is the son of a former Moscow transport minister.
The international crackdown on those allegedly linked to the fraud stretches across Europe, with bank accounts in Switzerland already frozen. Much of the information used to follow the money trail is believed to have come from Alexander Perepilichny, who was whistleblowing to Hermitage and living in Surrey before dying under mysterious circumstances last year while out jogging.
The police have ruled out foul play.