Khudainatov termed a “straw” owner’ of Russian yachts

Eduard Khudainatov, a non-sanctioned Russian individual and president of state-controlled Rosneft OJSC, has become the official beneficial owner of two yachts together worth more than $1bn – including the $700m Scheherazade, a superyacht linked to President Vladimir Putin. US authorities allege that he is a “straw” owner.

Court filings in the South Pacific island of Fiji, where the US is trying to seize the $325m yacht Amadea, depict in detail the sequence of offshore shell companies that were, the US claims, set up with the help of a yacht broker to conceal the true owners of both vessels. Lawyers for the listed owner and the yacht broker dispute the allegations.

A hearing is scheduled for Wednesday in Fiji on the fate of the Amadea.

To get to Khudainatov one has to head through a Russian doll-like sequence of companies and trusts, many of them based in offshore jurisdictions.

But the US alleges the “true beneficial owner” of the Amadea is Suleiman Kerimov, who was first sanctioned by the US in 2018.

The affidavit by a special agent with the FBI asserts that “the fact that Khudainatov is being held out as the owner of two of the largest superyachts on record, both linked to sanctioned individuals, suggests that Khudainatov is being used as a clean, unsanctioned straw owner to conceal the true beneficial owners of these vessels”.

The affidavit goes on to claim that “while Khudainatov is wealthy, there is no reason to believe he has the financial resources to purchase both the Amadea and the Scheherazade, which are collectively worth more than $1bn.”

The affidavit was posted on April 22nd and has now been reviewed by Bloomberg News. It revealed previously redacted details from a US seizure warrant for the Amadea that was filed in federal court in Washington.

The affidavit describes interviews with rival yacht brokers, crew members and emails, presented as evidence that the Amadea is really owned by Kerimov, who is worth an estimated $15.6bn.

A lawyer for the Amadea’s registered owner has written that the US effort to seize the yacht is based on hearsay evidence that does not prove its true owner is Kerimov.

The US affidavit cites evidence that Kerimov family members requested long-term changes to the Amadea consistent with owning, rather than renting it.

Kerimov made his fortune under President Putin by trading shares of the country’s biggest and most politically sensitive companies, including state-controlled gas giant Gazprom PJSC and the country’s biggest bank, Sberbank.

Simon Clark, a lawyer for Monaco-based Imperial Yachts, said in an email to Bloomberg that the yacht brokerage was aware of the claims contained in the filing (which refers to the broker only as “Company A”) and said that Imperial had engaged lawyers to challenge the assertions.

Founded by Evgeny Kochman and his sister Julia Stewart in 2005 in Monaco, Imperial has overseen the construction and management of dozens of superyachts. It oversaw the building of the Scheherazade, but Clark said the broker was not that vessel’s operational manager. The Scheherazade is currently being held at a port in Tuscany by Italian authorities because they believe the owner has links to “prominent elements of the Russian government.” However, the US has taken no public action against the Scheherazade.

The registered owner of the Scheherazade is also Khudainatov, through Bielor Asset Ltd, a company set up in 2020 in the Marshall Islands by KPM Consulting Ltd, the US affidavit in Fiji claimed.

KPM Consulting recently told the Trust Company in the Marshall Islands that the beneficial owner is Khudainatov, according to the affidavit.

A little over a year after Bielor Asset Ltd. was established, a long chain of shell companies was set up to organize the ownership of the Amadea. Khudainatov is listed as the ultimate beneficial owner of the yacht through Millemarin Investments Ltd, which in turn is owned by Invest International Finance Ltd, both registered in the British Virgin Islands, according to documents prepared by Millemarin’s lawyer that Bloomberg News had seen.

Invest International is owned by Boltenko Trust AG, registered in Zurich, which in turn is trustee of the September Trust, with Khudainatov as the “economic settlor,” according to the documents. The sale was financed through two other offshore companies with Khudainatov as the beneficial owner — one in the Cayman Islands and another in the BVI, the documents say.

Khudainatov left Rosneft in 2013, reportedly to set up his own oil firm. However, he is known to be a close associate of Igor Sechin, the CEO of Rosneft.

Any insurers of large Russian assets such as superyachts have faced a nightmare situation because, as Bloomberg observed, Russian billionaires were known to operate by unwritten arrangements with others or understandings that often left no paper trail. That made proving such agreements in court difficult, but less hard to decide in terms of “balance of probability”. Any insurer would need to decide whether, if insuring a ship or property with Russian links, whether it should work under the principle of 100% proof or “strong likelihood”. The more cautious insurers might well operate under the principle of “any likelihood”. The US forfeiture rules, for example, have a lower standard of proof than that needed in a criminal case. Filings in the US and Fiji show that US officials have gone to great lengths not only to detain the Amadea but also to seize it and try to sail it to US waters. The US filed a seizure warrant application in Washington on April 13th stating that Kerimov and those acting on his behalf had “caused US dollar transactions for the Amadea to be sent through US financial institutions” in violation of sanctions.

Fiji’s High Court ruled on May 3rd that US officials could seize it.

On May 5th FBI agents and US Marshals boarded the vessel in Fiji. with plans to sail it away. However Feizal Haniff, the lawyer for Millemarin, secured a temporary stay to delay the seizure. In documents he prepared to submit to the court with his application for the stay, Haniff argued that Fijian law doesn’t allow for US authorities to seize the vessel, only to restrain it at this stage of the case. The court quickly granted the stay.

Haniff wrote in planned court submissions that in the end were not required that “what the US authorities are saying is that Khudainatov and Mr Kerimov have a ‘side deal’ between them. The request by the US authorities relies on hearsay evidence of unidentified individuals to assert that Mr Kerimov is the beneficial owner of the Amadea.”

Haniff claimed that the conduct of the US authorities in Fiji had been “appalling”. He asserted that they offered crew members “obscene amounts of money” to sail the Amadea to the US, as well as threatening them with visa cancellations if they did not comply.

A Fiji court will consider Haniff’s appeal of the previous seizure ruling on Wednesday May 18th.

Several Kerimov family members were on the Amadea in the Caribbean in January 2022, and Kerimov’s daughter was on the superyacht in France in October 2021, the affidavit says.

In 2017 Kerimov was detained in France on charges of money laundering. He paid €40m in bail and was put under house arrest at his luxury villa in Cap d’Antibes. French prosecutors alleged Kerimov laundered money and evaded taxes by buying four villas on Cap d’Antibes through sham transactions and under-the-table payments using a frontman named Alexander Studhalter, a Swiss businessman who worked with the Russian billionaire for two decades. Kerimov and Studhalter denied wrongdoing, and the charges were dropped in 2018. A French investigation into tax fraud involving Kerimov was opened in March 2019, and that case is ongoing. Lawyers for Kerimov have denied any wrongdoing.