The Billion-Dollar Shell Game: How a Russian Banker Allegedly Laundered Embezzled Funds Through a Cypriot Law Firm and British Virgin Islands Network

In a complex web of offshore shell companies, backdated transactions, and forged documents, fugitive Russian banker Georgy Bedzhamov stands accused of orchestrating one of the largest banking embezzlement schemes in recent history. The former co-owner of Russia's Vneshprombank allegedly stole US$1.8 billion from his own bank, channeling the funds through an elaborate international money laundering network that has led to a high-stakes legal battle spanning from Russia to the United Kingdom.

Bedzhamov, alongside his sister Larisa Markus, was convicted in absentia by Russian courts for embezzling the massive sum from Vneshprombank between 2011 and 2015. The court ruling revealed that the siblings "developed a plan" to attract large depositors "in order to fill the Bank with cash and create the possibility of committing theft". Among the bank's affected depositors were VIPs including family members of Russian government members, government ministries, state-owned corporations, and the Russian Orthodox Church, who reportedly entrusted the bank with tens of billions of rubles in deposits.

The scheme unraveled in January 2016 when Russia's Central Bank discovered a shortfall of 187.4 billion rubles (US$2.3 billion) in Vneshprombank's balance sheet and revoked its banking license. By this time, Bedzhamov had already fled Russia in December 2015, shortly before his sister's arrest, initially to Monaco and later to London where he now lives under an asset freeze.

The Cypriot Connection

New documents from the Pandora Papers reveal how Bedzhamov used the services of Demetrios A. Demetriades LLC (known as Dadlaw), a prominent Cypriot law firm, to hide assets and disguise money transfers. The leaked documents show that Dadlaw helped Bedzhamov and Markus backdate the transfer of a company in what experts describe as a move designed to keep assets away from Russian authorities.

The siblings' business relationship with Dadlaw spanned nearly a decade, from 2010 until summer 2019. Even after evidence of their involvement in the Vneshprombank scandal became public, the law firm continued servicing them until a London court imposed a worldwide freezing order on Bedzhamov's assets.

One particularly telling example of the backdating scheme occurred when Markus transferred ownership of Stanferme Asset Management Inc, a British Virgin Islands company, to her brother nine days after her arrest on December 28, 2015. However, Bedzhamov waited 13 months to acknowledge the transfer, only accepting it on January 16, 2017, when he instructed Dadlaw to backdate the transaction to November 2, 2015—more than a month before his sister's detention.

"Often, backdated transactions are needed to confirm the legal ownership of a company or asset on a specific date," explained Ilya Shumanov, director of Transparency International in Russia. "An attempt to confirm the transfer of the company's shares retroactively looks like a pre-agreed action by the parties in order not to lose control over the assets."

The Shell Company Network

The Pandora Papers documents reveal how more than US$50 million was loaned to Bedzhamov in 2012 and 2013 through a complex network of shell companies. At the center was Felarco Management Limited, a Cypriot company that acted as little more than a conduit, receiving large sums from obscure UK entities and quickly transferring identical amounts to Bedzhamov.

The money flows followed suspicious patterns, with UK limited liability partnerships Tradeberg United LLP and Silverrow Invest LLP—ultimately owned by companies in the Marshall Islands and Belize—providing the funds. For instance, Tradeberg United loaned Felarco Management US$20 million on December 10, 2012, and Felarco Management loaned Bedzhamov the same amount just 10 days later.

These loan agreements contained unusual features that raised red flags among experts. They lacked key elements typically found in commercial loans, including repayment schedules, guarantor information, and stated purposes for the funds. Even more suspicious, the agreements misspelled Bedzhamov's name in two different ways ("Bezamov" and "Bedgamov"), which experts suggest could be used to mislead bank compliance divisions.

"The use of different spelling versions of the client's name could be used to mislead the compliance division of a bank ... in an attempt to avoid being held accountable by the financial regulator," Shumanov explained.

The UK Legal Battle

The embezzlement case has now moved to British courts, where Vneshprombank is pursuing a claim for US$1.34 billion to trace and recover the stolen assets. The legal proceedings have been complicated by sanctions issues, as A1 LLC, the company funding Vneshprombank's litigation, was previously owned by sanctioned Russian oligarchs including Mikhail Fridman, German Khan, and Alexey Kuzmichev.

In a May 2024 High Court judgment, Justice Cockerill found "reasonable cause to suspect" that A1 LLC remains controlled by designated persons despite its alleged sale to an 85-year-old employee for just 714 rubles (approximately US$10) in March 2022. The court noted that the sale price was "surprising on its face" and that the financial documentation "fails to provide a coherent or robust justification for that figure".

Meanwhile, Bedzhamov continues to live in London under an asset freeze, with a court-approved monthly allowance of £120,000 (around US$160,000) to cover his subsistence, rent, personal security, and other expenses. Russian authorities continue their global hunt for hidden assets, with the state's obligations from the Vneshprombank collapse rising to 218 billion rubles (around US$3 billion) by 2021.

Broader Implications

The Bedzhamov case highlights the sophisticated methods used by financial criminals to move illicit funds across borders and the challenges faced by authorities in tracking and recovering stolen assets. The use of multiple jurisdictions, shell companies, and professional enablers creates what experts call a "veneer of legitimacy" around dirty money.

"Often loans without a clearly defined repayment period and not requiring repayment, which are carried out by one person, but are actually made in the interests of another person — these are transactions that have signs of money laundering," Shumanov noted.

As the legal battle continues in London, the case serves as a stark reminder of how the international financial system can be exploited by those with sufficient resources and professional assistance. The ultimate resolution will depend on whether British courts can successfully pierce through the layers of offshore complexity to reach the underlying truth about where the billions in stolen funds have gone.

Sources:
[1] Organized Crime and Corruption Reporting Project (OCCRP) - "Fugitive Russian Banker Used Cypriot Law Firm to Hide Assets, Move Money" (https://www.occrp.org/en/project/the-pandora-papers/fugitive-russian-banker-used-cypriot-law-firm-to-hide-assets-move-money)
[2] Courts and Tribunals Judiciary (UK) - "Vneshprombank v Bedzhamov Judgement" (https://www.judiciary.uk/wp-content/uploads/2024/05/Vneshprombank-v-Bedzhamov-Judgement.pdf)