Bloomberg News

BTA Bank Seeks Two Jail Sentences in $4 Billion Fraud Suit

June 21, 2011

(Adds Ablyazov jail hearing in eighth paragraph.)

June 21 (Bloomberg) -- BTA Bank, the biggest Kazakh lender before its nationalization in 2009, is seeking U.K. prison terms for two men in connection with a $4 billion fraud allegedly spearheaded by former Chairman Mukhtar Ablyazov.

Syrym Shalabayev, Ablyazov’s brother-in-law who’s the subject of an arrest warrant for failing to reveal his assets, deserves an extra week to comply before being sentenced, Justice Michael Briggs ruled yesterday at the High Court in London. BTA had sought an immediate sentence for him at the hearing.

Shalabayev, accused of secretly administering Ablyazov’s assets, must take “a more serious approach” to the claims, Briggs said at the hearing. He “is likely to face a very serious custodial sentence” if he fails to do so.

BTA, which defaulted on $12 billion of debt before restructuring last year, filed a series of U.K. cases against Ablyazov and ex-Chief Executive Officer Roman Solodchenko over claims they siphoned money using fake loans. The lender says litigation against the men will benefit Royal Bank of Scotland Group Plc, Barclays Plc, Commerzbank AG and other creditors that financed its rapid growth before the global credit crisis.

Shalabayev, whose whereabouts are unknown, is considering cooperating in the case, which has already resulted in an order to freeze 200 million pounds of his assets, his lawyer said at yesterday’s hearing. Almaty-based BTA seeks a court order forcing the lawyer to reveal Shalabayev’s contact details.

$290 Million

At a separate Court of Appeal hearing yesterday in a related case, the bank renewed its effort to win a two-year prison term for Paul Kythreotis, a U.K. citizen who directed a Cyprus-based company that allegedly helped siphon at least $290 million from BTA.

A London court last year froze $68.3 million of Kythreotis’s assets, while BTA said new evidence was uncovered through raids of an office and home in Cyprus and a storage facility in London. Kythreotis’s lawyer declined to comment.

BTA last month asked a judge to jail Ablyazov for failing to disclose his assets under a freezing order. The bank said its forensic accountants uncovered evidence of more than 600 shell companies used by Ablyazov to hide his wealth. Judge Nigel Teare today said those claims will be heard in September or October.

Ablyazov was previously accused of violating the freezing order by failing to reveal his ownership in a Moscow skyscraper project. The earlier dispute prompted the judge overseeing the case in August to place an estimated $5 billion in Ablyazov’s assets into receivership under the control of KPMG LLP during the case.

--Editors: Peter Chapman, Christopher Scinta

To contact the reporter on this story: Erik Larson in London at elarson4@bloomberg.net.

To contact the editor responsible for this story:.

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net.


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