17 Jun 2020
By Roman Shleynov, OCCRP, 16 June 2020
OCCRP — One day in the summer of 2013, the central Moscow office of Fonbet, Russia’s largest sports betting company, looked like a besieged fortress.
Sparks and the smell of burnt metal filled the air. Officers from the anti-corruption directorate of the Ministry of Internal Affairs had come to execute a search warrant. Finding a barred door, they sawed it open using a grinder.
Before the search, investigators had used marked banknotes to place bets on tennis, soccer, and basketball matches on the company’s terminals. They found that Fonbet was providing online betting services using a website registered abroad. All forms of online sports betting were illegal in Russia at the time, so a criminal investigation was opened. Police found the marked bills and established that Fonbet was operating an illegal site. But despite the dramatic raid and apparent proof of wrongdoing, not much happened — except for a sudden change of ownership.
Today, Fonbet, with its network of brick-and-mortar locations and online services, remains Russia’s largest sports betting company. According to one advertising firm, it was the country’s largest advertiser during the 2018 World Cup.
Fonbet’s prominence was underscored in April when it briefly appeared on a government list of “systemically important companies” that would be eligible for state support during the COVID-19 crisis. It was removed from the list after prosecutors and finance ministry officials questioned its inclusion.
Freeman Sachs AnnuitiesFollowing the public scandal, IStories, OCCRP’s newest Russian member center, started looking into the company. The people behind Fonbet are not widely known, but the investigation shows that several of them had suspicious connections and questionable financial dealings. It also reveals new information about the company’s opaque transfer of ownership from one set of operators to another immediately after the 2013 raid, raising questions about the police operation’s true intent.
The major findings include:
- Four people associated with Fonbet sent or received large sums of money through Ukio Bankas, a now-defunct Lithuanian lender that is closely associated with the Troika Laundromat. The massive international scheme, used to launder millions through the bank, was first uncovered by OCCRP and partners in early 2019.
- One of Fonbet’s founders, chess grandmaster Anatoly Machulsky, used a personal Ukio account to send nearly US$200,000 to a member of an organized criminal group led by infamous Russian mobster Alimzhan “Taiwanchik” Tokhtakhunov.
- Machulsky reportedly gave up his stake in Fonbet after the police raid, though his daughter’s company continued to make millions from the company’s online business even after his death.
- One of Fonbet’s new owners appears to be Alexander Burtakov, a colorful figure who has business ties with members of an elite special unit of Russia’s Ministry of Internal Affairs. He is also featured in the Ukio data, which shows that he, as well as another Fonbet co-owner, received money through companies that sent hundreds of suspicious transactions through Ukio Bankas, making them a part of the Laundromat itself.
”The Financial Action Task Force requires state regulators in different countries to pay special attention to the gambling industry due to the high risk that the money of dubious origin may pass through it,” said Ilya Shumanov, deputy director of Transparency International in Russia. He noted that, since the gambling business has often been used for money laundering, financial transactions through Ukio bank and Laundromat companies should be a serious cause for concern.
Reporters’ inquiries to Fonbet’s general director, its owners, and Burtakov received no response.
The Grandmaster Loses
Anatoly Machulsky, who died in London in 2017, might seem an unlikely founder of a massive bookmaking business. He was a chess prodigy in the Soviet Union, winning the country’s youth chess championship at the age of 16 in 1973, and going on to become an international grandmaster.
But his interests weren’t limited to chess. Even in the Soviet period, according to his official Russian Chess Federation biography, he was considered a “great specialist in gambling among chess players.” In the latter half of his life, Machulsky turned his hobby into a lucrative business, leaving the chess world and founding Fonbet in 1994.
But according to Ukio Bankas records, he also sent money to a member of a Russian-American criminal group that specialized in gambling. In 2010, Machulsky used a personal account at the bank to send $192,000 to a man in the United States named Anatoly Golubchik as part of an unspecified loan agreement.
Three years later, Golubchik was indicted in a U.S. district court in New York for money laundering, racketeering, extortion, and various gambling offenses. According to the indictment, he was one of three leaders of a Russian criminal group, headed by infamous underworld figure Alimzhan “Taiwanchik” Tokhtakhunov, that laundered more than $100 million in proceeds from their gambling operation into the United States. The organization operated “a high-stakes, illegal sports gambling business out of New York City that catered primarily to Russian oligarchs living in Ukraine and Russia,” according to the FBI. Golubchik was sentenced to five years in prison.
Nor was this the only time Machulsky employed Ukio’s services to handle large sums. Bank documents show that, in five transactions in 2012 and 2013, he received over $18 million from Alexey Khobot, a man who is now reportedly one of Fonbet’s major shareholders.
According to insiders, Machulsky and Khobot were in charge of Fonbet’s online betting business. The multi-million-dollar transaction is the first documentary evidence of a financial relationship between the two men.
As with many Laundromat transactions, the money moved between two Ukio accounts. The transfers are listed as payments for “loan agreements,” the nature of which is not known. Khobot did not respond to reporters’ questions sent via the general director of his Russian company.
A Sudden Change
Machulsky’s ownership of Fonbet came to a sudden end after the summer 2013 raid on the company’s Moscow office.
On the surface, the police operation was straightforward: The company had run afoul of regulations that, after 2009, banned Russian companies from accepting bets online.
In response, many of them established websites in foreign jurisdictions not subject to Russian law enforcement.
“Online [bookmaking] businesses were registered in Belize, the Isle of Man, Gibraltar, or, for example, in Curaçao, the cheapest and least regulated gambling jurisdiction,” said Paruyr Shahbazyan, the head of Bookmakers’ Rating, a website that provides analysis in the field. Such online betting platforms were popular with customers, Shahbazyan said, because the illegal transactions were not taxed.
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