Secret Billionaire Unmasked in Kazakh Fraud Hunt Caused by Riots

Secret Billionaire Unmasked in Kazakh Fraud Hunt Caused by Riots

As investigators closed in on their biggest target of Kazakhstan’s anti-corruption campaign, they uncovered clues in Kairat Satybaldyuly’s meticulous notes.

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(Bloomberg) — As investigators closed in on their biggest target of Kazakhstan’s anti-corruption campaign, they uncovered clues in Kairat Satybaldyuly’s meticulous notes.

The eldest nephew of Kazakhstan’s former president, Nursultan Nazarbayev, had never stood out publicly for his wealth until government agents arrested him as he prepared to depart Almaty in a rented private jet.

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He soon began surrendering assets as investigators dug up evidence indicating some had been acquired illegally, said Askhat Zhumagali, head of the anti-corruption agency that oversees the crackdown. So far, Satybaldyuly has ceded 733 billion tenge ($1.65 billion) worth of holdings to state ownership, he said. Satybaldyuly’s lawyer confirmed the transfer.

A fortune of that magnitude would have made him the seventh-richest Kazakh on Forbes’s billionaire list this year. His wealth was estimated at just $160 million in 2018, when the magazine placed him 36th.

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The drama unfolded weeks after mass protests over a surge in fuel costs spiraled into deadly unrest across central Asia’s largest energy producer that killed about 230 people in January 2022. President Kassym-Jomart Tokayev crushed the riots with the help of Russian troops. As the political fallout spread from what Tokayev called a coup attempt, Nazarbayev’s family and their inner circle faced the biggest repercussions.

Seeking to prise open their grip on Kazakhstan’s $260 billion economy, Tokayev sidelined Nazarbayev and ousted his long-serving predecessor’s relatives from key posts in state companies. But most of the family got off easy compared with Satybaldyuly, 54, the son of Nazarbayev’s younger brother.

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The haul recovered by the government from the tycoon includes gems, company stakes, property and $732 million in cash, Zhumagali said in an interview detailing the investigation for the first time. The jewelry alone was worth about $230 million, while the total forfeited by Satybaldyuly accounts for more than two-thirds of all the money the Kazakh authorities recovered in the two-year anti-corruption campaign at home.

For all the efforts to camouflage his fortune, Satybaldyuly remained “very scrupulous and pedantic,” Zhumagali said. “He kept records on paper, handwritten notes and auditors’ reports, receipts and flows of money from his various business entities,” the anti-corruption chief said.

Satybaldyuly alternated between government and business as he rose to prominence, with stints at the Astana mayor’s office, the security service and the ruling party as well as senior roles at a state oil company and the railway monopoly.

In 2015, he founded an investment company, Alatau Capital Invest. The same year he made his biggest known deal by starting to build up a large stake in Kaspi.kz, the country’s biggest fintech group. Satybaldyuly exited his 30% stake for an undisclosed amount in 2019 as the group was preparing to sell shares in London in a listing that ended up valuing Kaspi.kz at $6.5 billion.

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Satybaldyuly also owed some of his wealth to an acquisition in 2015 — according to the anti-corruption agency — that allowed him to gain control of 252 kilometers (157 miles) of last-mile rail sidetracks that connected most large Kazakh cities to the nationwide lines. The fees charged for using the tracks were reduced by 93% once Kazakhstan took over the operation in 2022, according to data from the anti-corruption agency.

Since being detained in March 2022, Satybaldyuly received a six-year jail sentence after pleading guilty to embezzlement and another offense, according to court documents. He later admitted guilt for money laundering.

The transfers of more than over 730 billion tenge in cash and assets to the state were made voluntarily to compensate for the damage caused by Satybaldyuly and as an act of good will, his lawyer, Ashurbek Ashurbekov, said without commenting on the specifics.

Although Kazakhstan’s legislation allows for a reduced punishment given the extent of the compensation, Satybaldyuly hasn’t yet been shown any lenience, Ashurbekov said. He remains hopeful of some reprieve, the lawyer said.

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‘Mistake of the Clan’

“Satybaldyuly’s case is unique — he’s paying for the mistake of the clan,” said George Voloshin, a Paris-based analyst at ACAMS, an anti-financial crime body.

While Satybaldyuly largely conducted business through frontmen, his extensive record keeping, as well as tracking of cash flow and assets up until his arrest, was his undoing, according to Zhumagali.

The other notable businessman caught up in the anti-corruption crackdown was Kairat Boranbayev, the former owner of McDonald’s franchises in Kazakhstan and Belarus, whose daughter was married to Nazarbayev’s grandson. While imprisoned on charges of complicity in embezzlement — which he denied — Boranbayev transferred at least 134.5 billion tenge in cash and assets to the state, according to court and government statements. He was later released but with restrictions on his movements. A spokesman for Boranbayev didn’t immediately respond to a request for comment.

Satybaldyuly faced no charges for involvement in the riots, though the previous head of the anti-corruption agency said at the time that investigators probed his possible involvement in crimes that undermined national security. 

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Earlier this year, Tokayev made Zhumagali’s former boss at the anti-corruption agency his new prime minister. 

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Kazakhstan’s former security chief, Karim Massimov, who served two terms as Nazarbayev’s prime minister, received a prison sentence of 18 years on charges that included treason. Three of his ex-deputies have been jailed for as long as 16 years. Satybaldyuly’s younger brother, a former top security service official, was given an eight-year suspended sentence. 

Handpicked as successor by Nazarbayev half a decade ago, Tokayev is treading carefully, in part for fear of spooking investors in an economy that isn’t getting sufficient funding from abroad. State resources are meanwhile stretched at a time when oil production stagnates. 

He has also decried stark inequality plaguing the country, citing estimates that showed 162 people — or 0.001% of the population — own half of Kazakhstan’s total wealth, whereas the poorest 50% had a monthly income of close to $100.

Donations to charity have emerged as a way to show loyalty. Some of Kazakhstan’s biggest names in business, including Nazarbayev’s son-in-law, Timur Kulibayev, have made voluntary payments to funds that have drawn a total of over $400 million to help provide relief from disastrous flooding earlier this year. 

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For Zhumagali, Kazakhstan is on a mission to uproot corruption because it’s holding back economic development. Next year, new rules will oblige all citizens to submit an asset declaration, with individuals worth at least $100 million required to prove their holdings were legally acquired.

Satybaldyuly’s case is an illustration of Tokayev’s ambition — and its limits — to bring the country’s biggest power brokers to heel after the 2022 riots. The government has approved a law to take back ownership of assets it deems illegally obtained and authorities estimate about $2.3 billion worth of assets have been recovered over the past two years.

“In relation to capital flight from Kazakhstan over the last three decades, this is a trifling sum,” said Kate Mallinson, founder of Prism Political Risk Management in London. In the decade through 2013, illicit outflows from Kazakhstan exceeded $167 billion, according to Washington-based Global Financial Integrity.

“Essentially there is a grand bargaining going on between the Nazarbayev family and President Tokayev, and his lieutenants,” Mallinson said. 

—With assistance from Alexander Sazonov.

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