“Navalny’s banker”: Smuggle hundreds of millions in looted bank assets and become a political exile

In the early 2010s, a pair of ambitious bank execs heisted $1 billion from their customers, only to then pose as politically persecuted exiles.

Max Katz
ByMaxim Katz
Oct. 1, 2024

My investigation focuses on a major money heist perpetrated by Sergei Leontiev and Alexander Zheleznyak, the two Russian bank executives While at the helm of Probusinessbank, the duo smuggled and then laundered roughly $1B in the bank’s funds, according to the regulatory authority. In a bid to dodge the embezzlement charges, Leontiev and Zheleznyak fled Russia, only to reinvent themselves abroad as political dissidents. Aligning with the Anti-Corruption Foundation (ACF), the late Alexei Navalny’s non-profit organization, has become the centerpiece of their strategy that helps the fugitives avoid prosecution and prevents them from having to reimburse the stolen funds’ rightful owners.

Founded in 1993, Probusinessbank was a mid-sized Russian commercial bank, part of LIFE Financial Group, with a sprawling presence throughout Russia.

In 2011, the bank’s co-owners embarked on a massive embezzlement scheme as they set up a number of shell companies outside of Russia that drew significant funds from international investment firms. Probusinessbank brazenly collateralized those loans.

The investment firms in question were the U.K.-licensed Dinosaur Merchant Bank Ltd. (DMBL), and Otkritie Capital International Limited (OCIL) as well as BrokerCreditService (Cyprus) Limited (BCS).

One of their key schemes involved the Vermenda Holdings Limited (Vermenda) shell company controlled by Zheleznyak and Leontiev. Probusinessbank used its assets to secure over $153M in the loan money DMBL granted to Vermenda. Worse, the bank failed to report the pledged securities to the regulatory authority in their routine financial statements . Predictably, the loans were never repaid, and the broker ultimately seized the assets, leading to a loss of about $153M in Probusinessbank’s money.

The documents covering this scheme can be found here:

Two other entities, Ambika Investments Ltd and Merrianol Investments Ltd., engaged in similar schemes, taking out the loans from OCIL and BCS respectively, which resulted in the loss of $213M and $105M.

Besides failing to include the guarantees provided for the affiliated foreign companies in their reporting, the Probusinessbank execs lied when the details of the transactions were called into question by the Central Bank (CB), Russia’s regulatory authority. The latter had not picked up on the illegal dealings right away as those were missing from the official records.

In an attempt to hide the fraud scheme and subsequently launder the money smuggled through the brokers, Leontiev and Zheleznyak created a wider web of sham foreign firms, transferring the funds back and forth between multiple accounts, mainly those opened with Latvian- and Cyprus-based banks.

The scheme would not surface until Fitch Ratings eventually raised liquidity concerns regarding Probusinessbank’s activities in 2014. This prompted the regulator’s scrutiny, and a Probusinessbank informant tipped off the Central Bank.

After uncovering the evidence of potential embezzlement, the Central Bank requested that the additional reserves be added to the balance sheet. Probusinessbank’s failure to comply led to the regulator stripping it of its license in 2015.

Probusinessbank’s closure resulted in the pledged assets being seized by the brokers and left thousands of customers, including businesses, unable to recover their funds. According to our investigation, a total of at least $470M was smuggled using these three embezzlement schemes, more than two times the bank’s reported capital of $200M. Our website offers an insight into a convoluted network of banks, foreign accounts, and intermediaries that helped the executives launder the looted money.

A group of about 9000 Probusinessbank depositors, whose funds were misappropriated by Leontiev and Zheleznyak, have been in hot pursuit of their stolen money ever since. Convinced that the bank’s shareholders intentionally transferred the funds abroad in the lead-up to the bank’s collapse, the depositors have focused on reclaiming the assets from Leontiev’s companies. Of particular note are his accounts linked to Liechtenstein, whose authorities seized over $100M on money laundering allegations. However,t Leontiev and Zheleznyak are adamant that their problems arose from the political persecution, a claim that affected the court rulings, delayed the recovery process, and thwarted the scammed customers’ efforts. But for all these challenges, the depositors are keeping up their legal action across multiple jurisdictions.

In addition to the embezzled deposit accounts, several investors purchased promissory notes from various shell companies affiliated with Leontiev and Zheleznyak. They also attempted to recover their funds, but so far to no avail. Importantly, though, this is a separate matter unrelated to the bankruptcy of Probusinessbank. The note holders were not among Probusinessbank’s customers who were directly impacted by the embezzlement schemes tied to the bank’s collapse.

After the bank had folded, both Leontiev and Zheleznyak fled Russia. Once abroad, they began posing as political dissidents persecuted by the Russian government, hoping to evade extradition and retain control of the stolen assets. Tragically, their efforts did pay off. Despite the evidence of their massive swindle, the former Probusinessbank execs have been dodging the prosecution for years now by misrepresenting themselves as political exiles.

As we have already mentioned, the bankers aligned themselves with the Anti-Corruption Foundation (ACF), securing endorsements from the organization, which helped them build a public image as political fugitives. Both Leontiev and Zheleznyak began making hefty donations to ACF. In the 2022 FT article, Leonid Volkov, the then-ACF’s president, admits that starting in 2021, Sergei Leontiev has been shelling out $20,000 monthly donations to ACF, which works out to a total of $240,000 a year. Besides, the indications are that Leontiev might have started contributing earlier, but there is no publicly available knowledge of the exact details, as ACF does not disclose them in its financial reports.

Alexander Zheleznyak has also been a major fixture with ACF. As of 2023, he held a role as a treasurer of ACF’s U.S. branch and was involved in the organization’s key financial operations, such as authorizing the registration of ACF’s legal entity in Virginia. Notably, ACF’s official address matches that of Zheleznyak’s residence. His name appeared in various records, pointing to his heavy involvement as vice-president or a principal officer for ACF’s U.S.-based entities.

In a further move, Leontiev and Zheleznyak secured favorable media coverage, particularly in German-language outlets, to peddle their narrative, casting themselves as victims of Putin’s regime rather than scammers.

On top of that, the duo mounted an extensive lobbying campaign in the U.S. and Europe to reframe their case as that of political persecution. This included hiring public relations and law firms, engaging public intellectuals, and building ties to high-profile Western politicians.

The association with ACF was instrumental in their media and legal defense strategies. By leveraging their ACF connections, the bankers lobbied the U.S. Congress for political protection against the extradition. At least three U.S. congressional representatives wrote letters in their defense claiming that the persecution was politically motivated because of their support for ACF’s activities.

A critical piece of evidence used by Leontiev and Zheleznyak in their defense was a statement from Vladimir Ashurkov, ACF’s executive director. In July 2017, Ashurkov filed a sworn testimony in the U.S., stating that the charges brought against the bankers were politically motivated due to their association with Russia’s political opposition. He specifically mentioned their cooperation with ACF. Ashurkov’s testimony became the backbone of the bankers’ defense in court battles One such case was tried in a Polish court regarding the requested extradition of another former Probusinessbank’s executive, Yaroslav Alekseyev. Ashurkov’s statement and thePolish court ruling went on to significantly bolster their claims of political persecution in courts across Europe. For example, the Princely Court of Vaduz referenced the Polish judiciary’s resolution to drop the charges against Sergei Leontiev as arising from political persecution.

Vladimir Ashurkov’s statement suggesting the political nature of the charges centered around the bankers’ alleged role in the Navalny card project. However, our investigation has uncovered that the Navalny card justification was cooked up by Leontiev and Zheleznyak to portray themselves as political exiles. We have demonstrated that the project had nothing to do with their business activities, nor did it cause their legal woes. Instead, it was a post-facto excuse intended to shift the focus away from their fraudulent schemes, allowing them to apply for political asylum and avoid being prosecuted for their crimes. The root cause of their troubles was the large-scale financial fraud they orchestrated, not any genuine political engagement or opposition to the Russian government.

The Navalny card project was supposedly conceived in 2012 as ACF and the Leontiev-run Bank24.ru were contemplating the launch of a co-branded debit card in support of Navalny’s political cause. However, this project never got off the ground Moreover, there is nothing to suggest that it was ever genuinely pursued in the first place. While the Navalny card project appears to have been discussed, there is no record pointing to the bank’s promotion or launch efforts. Neither Leontiev nor Zheleznyak seemed to be heavily involved with the project before they fled Russia or have shown real interest in supporting the Navalny-led political opposition prior to their legal troubles, for that matter. In 2014, Zheleznyak was awarded a prestigious government accolade by President Vladimir Putin. Leontiev and Zheleznyak beginning to peddle the political persecution narrative following the collapse of their bank and their escape from Russia strongly suggests that the Navalny card project was being used as a cover story to explain the government’s backlash. But even if the Navalny card had been a thing, it would have carried almost no political risks for Leontiev and Zheleznyak. Over the years, many banks and financial institutions in Russia have partnered or collaborated with political figures without facing any significant retribution unless they were engaged in other illegal activities, that is.

This is an ongoing legal drama. Vladimir Ashurkov has even been summoned to provide a witness account in Leontiev’s defense for an upcoming trial:

To summarize, Leontiev and Zheleznyak’s alleged political activism did not commence until they fled Russia in 2015, just after their scam was exposed, precipitating Probusinessbank’s closure . Their attempts to pose as political dissidents emerged as a defense strategy, likely aimed at preventing their extradition and protecting the stolen assets. There is no evidence to suggest they were politically active, let alone faced repression, before the bank’s collapse. Far from it, the two were deeply embedded into the Russian establishment.