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Banker Linked to Kyrgyz Fraud Emerges With Alias at U.K. Fintech

Banker Linked to Kyrgyz Fraud Emerges With Alias at U.K. Fintech

When Michael Strogonov helped set up a payments company in Britain, few could have guessed his troubled past. 

Strogonov, 53, who described himself in corporate filings as a Russian based in Italy, didn’t appear to hold any other directorships, U.K. company records show. The business he incorporated in 2018 -- Dzing Finance Ltd. -- was just one of hundreds of firms that have been authorized by the Financial Conduct Authority to process payments and hold client funds.

What the documents didn’t reveal was Strogonov’s other identity. Under the name Mikhail Nadel, he had been chairman and controlling shareholder of Kyrgyzstan’s biggest bank until authorities seized it in 2010 amid a political crisis in the central Asian country. He was convicted in absentia and sentenced to 16 years in jail for fraud and money laundering at AsiaUniversalBank, or AUB. Global Witness, a London-based anticorruption group, alleged in a report he may have been involved in extensive misbehavior, while the International Monetary Fund pointed to “large-scale criminal activities” at the firm.

Nadel has denied any wrongdoing at AUB. He has always maintained that the allegations made against him were malicious and politically motivated, Steven Francis, a lawyer at Addleshaw Goddard LLP who represents Dzing, wrote in an e-mailed response to questions from Bloomberg. Nadel referred queries to Francis.

Yet his involvement with a U.K.-authorized payments firm -- potentially obscured by the use of an alias -- suggests how the fast-growing, lightly regulated sector may be struggling with corporate governance. A Bloomberg investigation in January showed how scores of problematic electronic money institutions, or EMIs, are now helping to move some 1.4 billion pounds ($1.9 billion) every day.

Banker Linked to Kyrgyz Fraud Emerges With Alias at U.K. Fintech

“I’m very surprised Nadel is involved in a U.K.-authorized firm, given his track record at AUB,” said Tom Mayne, a research fellow at the University of Exeter who worked on the Global Witness report. Does he use two names “to avoid the scrutiny that would undoubtedly come if regulators knew that he was involved?”

Nadel officially changed his name several years ago and both are stated in his passport, Francis told Bloomberg. He uses Strogonov, also his mother’s maiden name, in business matters and Nadel in private affairs, according to the lawyer. He declined to comment on whether Dzing had disclosed that Strogonov is Nadel to the FCA, and whether the regulator is aware of Nadel’s association with the company, citing confidentiality reasons. 

Patrice Weekes, a spokeswoman for the FCA, declined to comment on Dzing and on the regulator’s record. 

Strogonov was the only director listed in Dzing’s incorporation documents filed to the U.K. business register, Companies House, in May 2018. Though he resigned from the board in October of that year, before the FCA awarded Dzing a license to operate as an EMI in July 2019, he has remained active in helping to run the business ever since, people familiar with the matter said.

Nadel is not an employee of the firm and acts as an adviser to its controlling shareholder, Tatjana Orlova, according to Francis. In an exchange on LinkedIn, Nadel confirmed his advisory role but declined to comment further.

More than 200 EMIs have been approved by the FCA since 2018 amid Britain’s embrace of the fintech sector. The EMI industry is home to executives and shareholders tied to Baltic money-laundering scandals, alleged financial wrongdoing in Russia, health-care fraud in the U.S. and suspected wrongdoing in Luxembourg and Australia, Bloomberg’s review found. Though e-money firms are subject to lighter rules than banks, oversight weaknesses by the FCA are compounding the sector’s vulnerabilities, opening a door to dirty money, critics say. 

Mastercard Partnership

Dzing says it deals in prepaid cards and digital wallets through a partnership with Mastercard Inc. Jim Issokson, a spokesman for the Purchase, New York-based global payments giant, confirmed the relationship with Dzing but declined to comment further on the company. 

Dzing is also a “payment solution provider” for Mineplex Pte., a Singapore-based cryptocurrency business that offers a digital token called PLEX, according to a LinkedIn post by the company in September. 

The payment firm’s ties to individuals with a troubled past go beyond Nadel. Dzing’s chief financial officer, Iveta Kerpe, was suspended by Latvian regulators in 2015 after a probe into her then employer -- a subsidiary of Ukrainian lender Privatbank -- was linked to a $1 billion Moldovan banking scandal. She didn’t respond to requests for comment, and Francis didn’t comment on her behalf.

Orlova, Dzing’s main shareholder and the former wife of Russian fishing billionaire Vitaly Orlov, also did not respond to requests for comment on the company made to Francis, the Dzing lawyer.

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Nadel’s exact role at Dzing is unclear. People familiar with the firm say Nadel, who they know as Strogonov, is a prominent presence at Dzing and is involved with strategy and decision-making. When the company struck its deal with Mineplex at the Ritz-Carlton in Dubai, Nadel was in attendance and spoke on a panel, a photograph of the event shows. 

Before he got involved with AUB in the late 1990s, Nadel worked as finance director for a company delivering steam coal to Russian power plants, according to his LinkedIn profile. The lender quickly became the most important financial institution in Kyrgyzstan but also morphed into the “primary money-laundering service” for the regime of then-President Kurmanbek Bakiyev and his son Maxim, according to Johan Engvall, a researcher affiliated with the Central Asia-Caucasus Institute and Silk Road Studies Program who has studied the country. 

‘Promising Fintech’

Nadel’s proximity to the regime was clear to attendees at a 2009 gathering on the shore of Lake Issyk-Kul, where the president’s son was opening a hotel, according to a U.S. diplomatic cable later made public by WikiLeaks. 

Nadel was perhaps “the most high-profile of the guests” and acted like a “second host of the party, loudly toasting with the men and making advances at the women. He took a group of people to watch him swim in the lake, where his bodyguards followed him into the water.” Francis, the lawyer, declined to comment on the event and whether Nadel was present. 

Maxim Bakiyev didn’t respond to a request for comment made to a Facebook account that carries his name.

The Bakiyev regime collapsed in April 2010 after a violent uprising. The new government seized AUB to ward off what could otherwise have been a systemic crisis, according to the IMF. 

“A forensic audit of AUB suggested that the bank was used to conduct large-scale criminal activities, and that it was likely insolvent even before the April 2010 events,” the IMF noted in 2011. Global Witness, in the 2012 report, alleged that the lender had been at the center of a sophisticated money-laundering scheme that funneled money out of the country. A Kyrgyz state agency claimed in 2013 that Nadel and others had overseen hundreds of millions of dollars of sham payments and fictitious investments.

Today, Nadel spends his time between Tel Aviv and the U.K., according to his LinkedIn profile. He works as a financial consultant and a “mentor of a few projects” including a “promising fintech service.” There is no mention of Dzing -- or of Michael Strogonov.

©2022 Bloomberg L.P.