The downtown Moscow office of Fonbet, Russia's largest sports betting operator, appeared like a besieged castle one day in the summer of 2013.
The air was filled with sparks and the stench of burning metal. Officers from the Ministry of Internal Affairs anti-corruption directorate had arrived to carry out a search warrant. When they came upon a barred door, they used a grinder to saw it open.
Prior to the search, detectives used marked banknotes to gamble on tennis, soccer, and basketball games on the company's terminals. They discovered that Fonbet was offering online betting services through a website registered in another country. At the time, all types of Internet sports betting were prohibited in Russia, thus a criminal inquiry was launched. Police discovered the marked banknotes and determined that Fonbet was running an unlawful website. Despite the spectacular raid and obvious evidence of crime, little occurred – except for a rapid change of ownership.
Today, Fonbet is Russia's largest sports betting operator, having a network of live shops and online services. During the 2018 World Cup, it was the country's largest advertiser, according to one advertising agency.
Fonbet's importance was highlighted in April when it temporarily featured on a government list of "systemically vital enterprises" entitled for state assistance during the COVID-19 crisis. After prosecutors and finance ministry officials questioned its placement, it was removed from the list.
Alimzhan “Taiwanchik” Tokhtakhunov
Four Fonbet associates paid or received substantial quantities of money through Ukio Bankas, a now-defunct Lithuanian lender closely linked to the Troika Laundromat. The vast worldwide conspiracy, which was used to launder millions of dollars through the bank, was discovered in early 2019 by OCCRP and allies.
Chess grandmaster Anatoly Machulsky, one of Fonbet's founders, used a personal Ukio account to wire roughly US$200,000 to a member of an organized criminal gang commanded by famed Russian gangster Alimzhan "Taiwanchik" Tokhtakhunov.
Machulsky reportedly sold his stock in Fonbet following the police raid, but his daughter's firm continued to profit from the company's web operation long after he died.
One of Fonbet's new owners appears to be Alexander Burtakov, a colorful person with financial links to officials of Russia's Ministry of Internal Affairs elite special unit. He is also included in the Ukio data, which reveals that he and another Fonbet co-owner earned money from firms that submitted hundreds of questionable transactions through Ukio Bankas, therefore making them part of the Laundromat itself.
According to Ilya Shumanov, deputy director of Transparency International in Russia, “the Financial Action Task Force mandates state authorities in many countries to pay special attention to the gaming business due to the significant possibility that money of questionable origin may travel through it.” He emphasized that, because the gaming industry is frequently utilized for money laundering, financial transactions through Ukio banks and Laundromat enterprises should be viewed with caution.
The grandmaster loses
Anatoly Machulsky, who died in London in 2017, may appear to be an improbable creator of a huge bookmaking company. In the Soviet Union, he was a chess genius, winning the country's youth chess championship at the age of 16 in 1973 and going on to become an international grandmaster.
His interests, however, were not restricted to chess. Even during the Soviet era, he was regarded as a "great specialist in gambling among chess players," according to his official Russian Chess Federation biography. Machulsky transformed his interest into a profitable company in the latter portion of his life, abandoning the chess scene to start Fonbet in 1994.
However, according to Ukio Bankas records, he also paid money to a member of a Russian-American criminal organization that specialized in gaming. In 2010, Machulsky utilized a personal bank account to wire $192,000 to a guy called Anatoly Golubchik in the United States as part of an unclear loan deal.
Three years later, Golubchik was charged with money laundering, racketeering, extortion, and several gambling violations in a federal district court in New York. According to the indictment, he was one of three heads of a Russian criminal organization led by known underworld figure Alimzhan “Taiwanchik” Tokhtakhunov that laundered more than $100 million in gaming earnings into the United States. According to the FBI, the company ran a “high-stakes, illicit sports gambling enterprise out of New York City that catered exclusively to Russian billionaires living in Ukraine and Russia.” Golubchik received a five-year jail term.
This was not the first time Machulsky used Ukio's services to manage big quantities of money. Bank papers reveal that he got more than $18 million from Alexey Khobot, a person who is now apparently one of Fonbet's biggest owners, in five transactions in 2012 and 2013.
Machulsky and Khobot were in control of Fonbet's internet betting operations, according to sources. The multimillion-dollar transaction is the first documented evidence of the two men's financial ties.
The money was transferred between two Ukio accounts, as is common with Laundromat transactions. The transactions are reported as payments for "loan arrangements," the purpose of which is unknown. Khobot did not answer to inquiries from journalists supplied through the general director of his Russian firm.
Though Machulsky lost his direct ownership in Fonbet following the 2013 raid, it appears that the firm remained to be a profitable source of revenue for his family until 2019.
A sudden shift
On the surface, the police investigation appeared to be straightforward: the organization had violated legislation that, beginning in 2009, prohibited Russian enterprises from collecting bets online.
As a result, many of them set up websites in other countries that are not susceptible to Russian law enforcement.
“Online [bookmaking] enterprises were registered in Belize, the Isle of Man, Gibraltar, or, for example, Curaçao, the cheapest and least regulated gaming jurisdiction,” according to the report.
Paruyr Shahbazyan is the founder of Bookmakers' Rating, a website that provides industry analyses. Customers liked such online betting services, according to Shahbazyan, because the unlawful transactions were not taxed.
Fonbet appears to be employing similar strategies. Its website, fonbet.com, was run by a Panamanian corporation called Fonbet Corp, and the site's license was owned by a business of the same name in Curacao. The venture was a success: Fonbet's overseas site had more than three million users the year it was raided.
Despite the spectacular nature of the police raid, the corporation faced little legal ramifications. Ignoring the fact that fonbet.com was the apparent cause for the raid, nothing about the company's operations appeared to have changed. The site continued to operate as if nothing had happened, with 2.5 million users returning the next year. Despite the fact that a criminal prosecution was initiated, the company's general director at the time received just a two-year suspended jail term.
However, the tragedy caused significant adjustments behind the scenes. According to a friend of one of Machulsky's two former Fonbet partners, the business's principal owner, Vadim Sidorov, got an urgent offer to sell the firm soon after the raid, "practically in the investigators' office." He did exactly that.
Vladimir Bichan, who has previously overseen enterprises owned by former Internal Affairs Ministry officials, was quickly elected Fonbet's new general director.
Maxim Kiryukhin, a lottery operator from the southern Russian city of Stavropol who had controlled Fonbet's largest franchise, was the company's first new owner. However, little over four years later, his position was reduced to a minority portion of just under 9%, while Birusa, a Cyprus-based business, purchased 65 percent of Fonbet's shares.
Surprisingly, the 650 million ruble (US$10.5 million) payment for Birusa's acquisition has been pushed back to 2018. Fonbet had paid Birusa almost the same amount in dividends by that point, resulting in an acquisition in which no money changed hands.
“In the view of tax authorities, firms that execute such acquisitions may have previously been interconnected,” said Alexander Zakharov, a partner at the consultancy Paragon Advice Group. In other words, Birusa's purchase of Fonbet from Kiryukhin might be a pre-arranged swap rather than a genuine change of ownership.
If this is the case, the folks controlling Birusa may be the same as those behind its previous takeover. For years, their true origins remained unknown, hidden behind a labyrinth of offshore companies.
According to a story published by Novaya Gazeta, which cited inside sources, one of its owners is Alexey Khobot, the man who gave millions to Machulsky years before.
The other is said to be a colorful character named Alexander Burtakov. Burtakov, a Russian and Israeli citizen, is now a guy with extensive contacts and a global reach, including real estate and other businesses in Malta, Monaco, and Romania. In Israel, he lives in Herzliya, a tourist town half a kilometer from the Mediterranean Sea.
The practice of “reiderstvo”, or stealing a firm from its owner under the guise of a criminal inquiry, is well-documented in Russia. There is no concrete proof that this occurred in the Fonbet case. However, the company's abrupt change of ownership following the police raid, the hiring of a general director with ties to the Ministry of Internal Affairs, and the discovery of a new owner with the same ties are all very suspicious.
Burtakov had worked for two Laundromat enterprises before joining Fonbet.
In 2007, he got $50,000 through Freeman Sachs Annuities Inc, a Panama-registered firm that exploited Ukio Bankas accounts. According to the payment details, the transaction was made "for clothes," yet Burtakov is not known to have ever sold apparel.
Laundromat firms adopted the practice of marking transactions with alleged goods purchases to mask numerous obviously fraudulent transactions. Freeman Sachs was one of the firms that utilized terms like "toys" or "textiles" in hundreds of other transactions.
Burtakov earned $280,000 from Sherball Finance, a British Virgin Islands-based business that also handled Laundromat transactions, the same year.
In 2007, Sherball was also named in a Russian criminal case. In the case, a gang of fraudsters was paid millions of dollars for promising to solve a shareholder dispute at Ingosstrakh, one of the country's major insurance firms, through ties with high-level authorities. Sherball is listed in the judgement as a mover of part of the money and as a “technical company” affiliated with M-Bank, a lender that lost its license in 2015 for breaking banking regulations.
Another Fonbet owner with Laundromat ties is Sergey Tetruashvili. Tetruashvili, who has a German address, has been a co-owner of Bemo Logistik, a now-defunct Berlin-based firm that provided toners, cartridges, printer ink, home electrical equipment, and other commodities to Russia and Ukraine since 2003.
According to Ukio Bankas papers, Bemo got more than $100,000 from Adbridge Corp in 2007 and 2008, a corporation connected in the case of Erich Rebasso, an Austrian lawyer who was assassinated in Vienna in 2012 after being engaged in the Troika Laundromat.
Rebasso, who was 45 at the time, specialized in coaching Russian customers on how to do business in the West. However, he revealed to the Austrian police in a confessional letter that he had been employed to launder tens of millions of euros. He stated that he had been taking payments from Russian criminals for over a year and had transferred the funds — approximately $96 million in all — to other bank accounts at their request. Some of the accounts to which Rebasso moved money belonged to two of the Laundromat's main offshore firms. In February 2007, Rebasso sent more than $440,000 to Adbridge, one of the firms to which he moved funds.
He began receiving complaints and refund claims when his Russian clients began abusing his accounts to launder the proceeds of fraudulent investment schemes that robbed regular Russians of their savings. He was kidnapped and murdered in 2012 in an unresolved case.