Russian Organised Crime - Boiler Room Fraud

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This fraud investigation involved the representation of 322 clients from 30 countries in respect of the loss of USD $100 million.

The funds were lost as a result of a Russian organised crime fraud operation based in New York. The operation was a traditional "boiler room" in which high net worth individuals from around the world were targeted to invest with the promise of high returns and went by the name of First Equity Enterprises Inc and Evergreen International Spot Trading.

Pressure was put on the fraud operation as a result of the September 11 attacks in New York. There was a virtual mini-run on the funds as the fraud operation was based in the Twin Towers and another address in New York.

The matter came to light and Mark van Leewarden was instructed in conjunction with Warden Consulting as a result of funds disappearing from a BNZ account in Auckland. Immediate steps were undertaken to track the NZD 2.35 million. It was quickly ascertained the funds had been transferred to Switzerland.

Mark van Leewarden then travelled to Switzerland and took steps to freeze funds in a BNP Paribas account in Geneva through a private Seizure Order. It was subsequently established this account contained USD 4.7 million and it was also established that the following day one of the offenders in the boiler room (Gary Faberov) attempted to shift these funds from the account. In the absence of the Seizure Order, Mr Faberov would have been successful. Further steps were taken to seize other accounts held by fraudsters Gary Faberov and Andre Koudatchev.

On a number of visits to Switzerland, London and Australia the worldwide investigation and recovery steps were co-ordinated. Although funds were frozen on behalf of the client group, the US Government subsequently took steps under a Mutual Legal Assistance request from the United States to the Swiss Government to seize the funds.

As a result, a directive to the Bank resulted in the funds being removed and forwarded to the USA. This occurred without the knowledge of the Swiss Judge who froze the funds on our client group's behalf and was done by BNP Paribas management. The issue then arose as to how this could occur with a Seizure Order by us already in place. A legal argument then arose as to which order ranks in priority - the private Seizure Order or the Mutual Legal Assistance request.

The primary offender, Andre Koudachev, is a fugitive. The other offenders, including Polina Sirotina, Gary Faberov, Albert Guglielmo and Philip Levenson, were sentenced to various terms of imprisonment as a result of criminal proceedings brought by the US Attorney's Office.

Inquiries were also undertaken with the regulatory authorities including the Officer in Charge of the Vienna Police and the Budapest Organised Crime Unit resulting in the freezing of two bank accounts in Vienna and a further three accounts in Budapest.

Scrutiny was undertaken and evidence gathered also regarding the potential liability of banks both in Australia and the United States.

Missing Kiwi Money in Evergreen Tracked to Switzerland US Finds Russian Ring Guilty of 100m Fraud NZ Investigator Traces Missing Fund 100m Fraud Probe Linked to Terror Attack Mystery Russian Implicated in Kiwis Missing Millions Follow the Money Investors Hold Bank Liable for Losses at Currency Firm Investors New York Millions Missing

Further Reading

Sheridan Leslie Cox - Mendes Prior Fraud

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