Prevezon Holdings Ltd, Russian Tax Refund Fraud, NY 2017

acting Manhattan U.S. Attorney Joon H. Kim has announced a landmark $5.9 million settlement against the assets of 11 corporations, including Prevezon Holdings Ltd., accused of laundering proceeds from a massive Russian tax refund fraud scheme.

The US government’s complaint alleged that these corporations, which include owners of high-end real estate in Manhattan, were involved in the laundering process for a $230 million scam. The scandal was uncovered by Sergei Magnitsky, a Russian lawyer who died in pretrial detention under suspicious circumstances after attempting to expose the fraud.

In the stipulation of settlement, Prevezon Holdings Ltd. agreed to pay an astonishing $5,896,333.65 to resolve claims against all defendants, three times the amount originally traced from the Russian treasury fraud and over ten times the proceeds linked to New York property.

Kim emphasized the importance of the settlement in combating international financial crimes: “We will not allow the U.S. financial system to be used to launder the proceeds of crimes committed anywhere – here in the U.S., in Russia, or anywhere else.”

The fraud involved a Russian criminal organization’s elaborate scheme to steal corporate identities from Hermitage Fund portfolio companies, create sham lawsuits, and generate money judgments that were then used as the basis for fraudulent tax refunds.

Members of the organization who held positions at two Russian tax offices approved the refund requests within a day, with $230 million being disbursed shortly after. Illegal actions were taken to conceal the fraud and retaliate against those attempting to expose it.