A shell company in the British Virgin Islands wired $20 million to an investment vehicle in the Cayman Islands that was controlled by a large American hedge fund firm.
The wire transfer was the culmination of months of work by a small army of people. It was a stealth operation to hide the source of funds.
The Russian billionaire has relied on this investment strategy for two decades, using a string of shell companies, a small Austrian bank, and the connections of leading Wall Street firms to quietly place billions of dollars with prominent U.S. firms.
The key was that every lawyer, corporate director, hedge fund manager and investment adviser involved in the process could say that they weren't working for Mr. Abramovich. Participants weren't aware of who their money was being managed by.
Wealthy foreign investors have been able to move money into American funds using such secretive, roundabout setup, taking advantage of a lightly regulated investment industry and Wall Street's willingness to ask few questions about the origins of the money.
As the United States and other countries impose sanctions on those close to Putin, it could pose significant challenges.
The Internal Revenue Service asked Congress for more resources last week as it helps to oversee the Biden administration's sanctions program along with a new Justice Department task force. Lawmakers on Capitol Hill are pushing a bill that would require investment advisers to identify and more carefully vet their customers.
The purchase of an oil company by the Russian government that Mr. Abramovich sold back to the state at a huge profit has resulted in his fortune being estimated at $13 billion. European and Canadian authorities imposed sanctions on him and froze his assets, which include the famed Chelsea Football Club in London. The United States has not taken action against him.
Mr. Abramovich has assets in the US that include a pair of luxury residences near Aspen, Colo. He invested a lot of money with financial institutions. His ties to Mr. Putin have made him a controversial figure.
Many of Mr. Abramovich's U.S. investments were done by a small firm led by Michael Matlin, according to people with knowledge of the transactions who were not authorized to speak publicly.
Mr. Matlin issued a statement that described Concord as a consulting firm that provides independent third party research, due diligence, and monitoring of investments.
A spokeswoman for Mr. Abramovich didn't respond to requests for comment.
Concord did not directly manage Mr. Abramovich's money. It acted like an investment adviser and due diligence firm, making recommendations to the directors of shell companies in Caribbean tax havens about potential investments in marquee American investment firms, according to people briefed on the matter.
Concord executives were often introduced to hedge funds by big Wall Street banks.
According to an internal document prepared by a Wall Street firm, Concord arranged more than 100 investments in hedge funds and private equity firms for Mr. Abramovich. Millennium Management, BlackRock, Sarissa Capital Management, Carlyle Group, D.E. Shaw, and Bear Stearns are some of the funds that were included.
A low profile was maintained by Concord. It didn't have a website. It isn't registered with U.S. regulators. In 2020, Concord applied for and received a Paycheck Protection Program loan worth $265,000 during the Pandemic. A spokesman said thatConcord repaid the loan.
Some on Wall Street were wary of Concord's secrecy.
State Street, a financial services firm, filed suspicious activity reports with the U.S. government in 2015. State Street wouldn't comment.
The reports are not evidence of any wrongdoing, but they are required by the U.S. government.
American financiers had no interest in discovering the source of the money that Concord was directing. It was fine if background checks didn't turn up red flags.
A person with knowledge of the investment says that the hedge fund run by John Paulson received investments from a company that Concord represented. Mr. Paulson said in an email that he had no knowledge of the investors.
Highland Capital was steered tens of millions of dollars from two shell companies by Concord. According to federal court records, Highland hired a unit of the nation's largest bank to make sure that the companies were legitimate and that the investments complied with anti-money-laundering rules.
The investment was cleared by JPMorgan. The court records show that Highland didn't know the source of the money.
Big hedge funds might have accepted the money even if they knew it was from Mr. Abramovich. The man hadn't been sanctioned.
In the summer of 2012 a hedge fund received money from Mr. Abramovich, which shows how difficult it is for authorities to track down assets.
The manager of the fund, which oversaw billions of dollars but wasn't a big name on Wall Street, provided a detailed accounting of his involvement on the condition that neither he nor his firm be named.
Gerald McGinley, a New York-based wealth manager at Credit Suisse, contacted the fund manager in 2012 on behalf of a wealthy family. Mr. McGinley said Concord was interested in investing tens of millions of dollars with the hedge fund.
The fund manager was told that he would have to set up a special financial vehicle in an offshore jurisdiction so that the investment wouldn't incur U.S. taxes. The hedge fund would get a small percentage of the total investment as a fee, and Credit Suisse would get 20 percent of that fee.
The fund manager traveled to Concord's offices in Tarrytown, New York with one of his colleagues from Credit Suisse. The offices were hidden from other people in the building. There was no artwork or decorations on the walls.
The fund manager didn't know who Concord's client was.
Mr. McGinley did not respond to questions about his work with Concord. A Credit Suisse spokeswoman wouldn't say anything.
After meeting with the fund manager, Concord executives referred him to High Water, a firm that specialized in providing corporate governance services to investment managers.
There are shortages of essential metals. Russia is the world's largest exporter of the metal and the price of it has gone up as a result. The price of nickel, a key Russian export, has been rising.
Financial turmoil. Russia's access to foreign capital and its ability to process payments in dollars, euros and other currencies will be affected by the sanctions. Russia is also on alert for cyberattacks.
For $15,000 a year, plus other fees, HighWater would provide an employee to sit on the board of the financial vehicle that the fund manager was expected to launch to accept the wealthy family's money, according to emails between the fund manager and a HighWater executive reviewed by The.
Boris Onefater was brought on as a board member by the fund manager. Mr. Onefater said he couldn't remember who the money was from.
Mourant was hired by the fund manager to get the paperwork for the vehicle. The managing partner of Mourant did not respond to questions.
He hired GlobeOp Financial Services to make sure that the company was complying with anti-money-laundering laws and not doing business with anyone who had been sanctioned by the U.S. government.
Emma Lowrey, a spokeswoman for GlobeOp, which is now part of the financial technology company, said that they abide by all laws in all countries in which they do business.
In an email to The Times, John Lewis said that his firm had not dealt with Concord since 2011.
Mr. Lewis said there were no links to Russian money. GlobeOp did not identify anything unusual, high risk, or politically exposed persons with respect to any investors.
The fund opened for business in July of 2012 after receiving $20 million in wire transfer. The expectation was that tens of millions more would follow. The manager of the main U.S. hedge fund employed the same investment strategy that was used by the Cayman fund.
The $20 million was wired from a British Virgin Islands address.
The money came from Kathrein Privatbank in Vienna. After passing through another Austrian bank, it arrived in Grand Cayman. JP Morgan was acting as an intermediator for banks with smaller international networks.
A spokesman for Kathrein wouldn't comment. A spokeswoman for the company did not respond. Representatives for Raiffeisen didn't respond to questions.
The fund manager noticed that some of the documentation was signed by a lawyer. He thought he was managing money for a Russian billionaire. GlobeOp had verified that Caythorpe was compliant with know-your-customer and anti-money-laundering rules.
He didn't know who controlled Caythorpe.
Markets tanked after Russia invaded the Ukrainian region of Crimea. The fund manager made a bearish bet on the stock market, and his fund was crushed when stocks rallied.
Caythorpe withdrew its money from the fund. Caythorpe was sold.
The fund manager said he didn't realize until this month that he had invested in Mr. Abramovich.
Susan C. Beachy and Kitty Bennett were involved in the research. The reporting was contributed by Maureen Farrell.
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