Two companies that Russian state banker Andrei Kostin allegedly used to control a pair of megayachts were transferred to secretive Cyprus investment funds on the eve of the Ukraine invasion, making it impossible to see who owned them, financial records show.
The funds were managed by a company called Inveqo Fund Management Ltd. At the time, Inveqo was owned by the wife of a Cypriot lawyer, Christodoulos Vassiliades, who was sanctioned by the U.S. last year for acting as a “prolific enabler” of Russian oligarchs.
Inveqo marketed the special type of funds used to own the megayachts — known as “registered alternative investment funds,” or RAIFs — as a way to help clients avoid revealing ownership information after the European Union tried to crack down on corporate secrecy, according to marketing materials found amid leaked emails obtained by OCCRP.
One user appears to be Kostin, the longtime head of Russia’s state-owned VTB Bank, who has been sanctioned by the U.S. and European Union for his close ties to the regime of Vladimir Putin. Anti-corruption activist and opposition politician Aleksei Navalny, who died in a Russian prison camp this year, first linked Kostin to a 62-meter megayacht, the Sea & Us, in 2019. In February this year, a U.S. indictment of Kostin for sanctions evasion alleged that the banker also owned another megayacht, the 66-meter Sea Rhapsody, and that the vessels were held through two offshore companies, one based in the Marshall Islands and another in Belize.
The yacht Sea & Us, shown on Navalny’s website.
The U.S. indictment claimed that Kostin “owned and controlled” these two offshore companies through “a series of additional shell companies, nominee owners, and trust and investment fund structures” which were used “to obscure his true beneficial ownership of the Sea Rhapsody and the Sea & Us.” (Kostin did not respond to a request for comment sent through VTB bank.)
The indictment did not name these structures, but an OCCRP investigation has found that in October 2021, as tensions between Russia and the West over Ukraine were rising, ownership of the two offshore companies that held the yachts was transferred to two RAIFs managed by Inveqo, according to the Cypriot corporate register and financial records. (The funds have since been dissolved, and the current ownership structure of the yachts is unknown.)
The Cypriot government had only introduced RAIFs in July 2018, just two months after a European Union anti-money laundering directive required member states to create publicly accessible registries of “ultimate beneficial owners,” or UBOs, of companies.
RAIFs received a particularly light regulatory touch. Unlike most funds, RAIFs only need to be registered — not licensed — by the Cyprus securities regulator, and they are available only to institutional and other professional investors.
The use of RAIFs to obscure even highly sought-after assets like the megayachts highlights how hard it is to enforce sanctions effectively, said Stephan Blancke, an associate fellow at the Royal United Service Institute, a U.K.-based think tank.
“This raises the question: How many other beneficiaries of these Cypriot alternative investment funds exist that we do not know about?” he asked.
The lawyer whose firm marketed the funds, Vassiliades, said that he and his law firm had always acted in “strict compliance” with Cypriot and European Union sanctions and anti-money laundering and anti-corruption rules and regulations.
He said that he had never been informed that Kostin or “any other sanctioned person” was an investor or beneficial owner in the RAIFs and yachts identified by OCCRP. “I was not informed or had any knowledge of this fact. No one ever disclosed such facts to me,” he said.
Vassiliades himself was sanctioned last year along with other “entities and individuals in his network” the U.S. said had acted as “prolific enablers of a number of Russian oligarchs.” (The sanctions announcement did not mention which oligarchs he was accused of working with, nor did it name Kostin.)
Marketing RAIFs to Hide Ownership
Inveqo was set up in late 2018 and licensed as an “alternative investment fund manager.” It was acquired in May 2021 by a company owned by Vassiliades’ wife, Eleni Vasiliadou, who also worked as an office manager at her husband’s law firm, Christodoulos Vassiliades & Co LLC.
Although Inveqo was nominally owned by Eleni, a leaked email obtained by OCCRP showed that Vassiliades’ law firm circulated its marketing materials, and even referred to Inveqo as “our own affiliated company.”
Although Vasiliadou did not respond to a request for comment, Vassiliades told OCCRP that she had owned Inveqo from June 2021 to May 2023 “as an investment” and that she had not been involved in the company’s day-to-day operations.
He added that the email had been sent as part of a bulk newsletter to “many clients” of his law firm and was “not meant to promote or market Inveqo.” He said the term “affiliate” had been used to refer to “a firm in my law firm’s referral network and to which my law firm acted as a legal advisor.”
“Neither me nor my law firm ever controlled INVEQO in any way, or had any ownership interest, or engaged or participated in INVEQO’s business activities or day-to-day operations,” he wrote.
The marketing materials in the leaked emails show that RAIFs were presented to prospective clients as a way of avoiding having their ownership of assets revealed by the new EU transparency law, which the law firm referred to as “optimization of the UBO disclosure requirements.”
The materials laid out how the actual investor in an RAIF would not appear when Cyprus published its register of company owners, but would instead remain hidden behind the name of an external fund manager.
An excerpt from marketing materials for RAIFs obtained by OCCRP.
In one information sheet distributed by the law firm, prospective clients were assured that “access to investors [sic] information is only available to the Fund Manager and to the Depositary.”
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Another example of the marketing material for RAIFs.
Vassiliades denied that the RAIFs were marketed as a way of avoiding ownership disclosure.
“Neither I or my law firm ever promoted or enabled any sanctions evasion or promoted any non-declaring of owners of assets. Any such practice is entirely against my professional ethics,” he said.
In another leaked email introducing Inveqo to prospective clients, a Cypriot company called InterTaxAudit — which Vassiliades’ law firm calls its “affiliated partners” — referenced the disclosure requirements under the new EU directive.
“The Fund structure can be a solution to this problem,” the email continued, “since it does not require a UBO, the investors are holding units of the Fund, they don’t ‘own’ the assets therefore their names are not disclosed anywhere.”
In other words, clients could continue to control assets through these funds, but with their ownership hidden.
Moving Yachts Into RAIFS
The U.S. indictment alleged that Kostin owned his megayachts through companies registered in the Marshall Islands and Belize. In October 2021, both of those offshore companies were transferred into Inveqo-managed RAIFs: Ostreus RAIF V.C.I.C. and Lorenor RAIF V.C.I.C., respectively, financial statements show.
Andrei Kostin.
Kostin was sanctioned by the European Union in February 2022, a day before Russia’s full-scale invasion of Ukraine.
Cyprus made its register of beneficial owners publicly available that summer to adhere to the EU anti-money laundering directive. But thanks to the RAIFs, the yachts could not be found. Furthermore, because Vassiliades’ wife — not Vassiliades himself — owned Inveqo, the company was not affected when the U.S. and U.K. sanctioned Vassiliades in April 2023.
Where Did the Yachts Go?
The two megayachts were not the only Kostin-linked luxury assets whose ownership was obscured behind Inveqo RAIFs. In November 2021, the same RAIFs also took over three Cyprus firms linked to Kostin’s property holdings by previous OCCRP and Navalny investigations: Angerston Holdings Ltd, Castelor Investments Ltd, and Eralmor Holdings Ltd.
Angerston owned a luxurious three-story townhouse in Moscow, while Eralmor owned a luxury apartment in Moscow. Castelor held a share in a countryside resort in the Tver region northwest of Moscow for which it paid $58 million.
Kostin’s Alleged “Co-Conspirators” in Cyprus and Russia
The U.S. indictment against Kostin bolsters the findings of a previous OCCRP investigation, which named two people who appeared to be used by Kostin as fronts for his holdings: Eric Whyte and Natalia Solozhentseva.
Since RAIFs were first introduced, the Cyprus company registry has publicly clarified that the ultimate investors in the funds must be declared, not just the fund managers, but it is difficult to know the extent to which this is being enforced. In November 2022, the European Union’s Court of Justice ruling struck down the requirement for member states to publish beneficial ownership information on privacy grounds, and the Cyprus registry closed to public access six days later.
In July 2023, both of the Inveqo-managed funds used to hold the Kostin assets were dissolved, for reasons that remain unclear. Inveqo changed ownership in May 2023 and was itself dissolved earlier this year.”
Tatiana Tkatchenko contributed reporting.
