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Bahamas-Bound Banker’S Guilty Plea To $1.2bn Scam

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamas-bound private banker has pled guilty to his role in a $1.2bn money laundering scheme that sparked an investigation by local financial services regulators.

Matthias Krull, who was set to start his new job as a Gonet Bank & Trust (Nassau) managing director before year-end 2018, this week admitted his role in facilitating a plan by corrupt Venezuelan government officials to loot that country’s state-owned oil company, PDVSA, of millions of dollars.

Krull’s guilty plea, and upcoming sentencing in the south Florida federal court on October 29, may have ensured The Bahamas and its financial services industry “dodged a bullet” from a regulatory and reputational perspective.

The German private banker was highly valued as a business acquirer in his previous position with Julius Baer (Panama), having used his education in Venezuela and contacts with the German community there to amass a $600m portfolio featuring numerous high net worth individuals from that country.

There is every likelihood he would have brought much of that portfolio with him to Gonet Bank & Trust (Nassau), but international media reports suggested Krull worked with numerous politically exposed persons (PEPS) who could potentially be involved in schemes such as the one that brought him down.

Krull was part of a major expansion planned for Gonet’s Bahamian business, which also involved the capture of Jean-Marc Fellay and Patrick Feuz - the former chief operating officer and deputy chief executive, and chief executive, respectively, for Julius Baer’s Nassau-based operations.

There is nothing to suggest that Messrs Fellay and Feuz have done anything wrong, or that they were involved with Krull’s Venezuelan scheme, and neither man has been named in court documents related to the Florida case. However, the finews.com website alleged that Krull “booked” most of his Venezuelan clients on Julius Baer’s Bahamas unit.

The arrest and subsequent charging of Krull, when unveiled earlier this month, was serious enough for the Securities Commission of The Bahamas to begin its own investigation and alert the Central Bank.

“The Commission noted that the matter potentially references regulated entities in The Bahamas, and therefore the Commission is investigating the matter and has also contacted the Central Bank of The Bahamas in this regard,” the regulator said in a statement.

Krull, in his plea agreement, agreed with US federal prosecutors that his role was as “a banker and money laundering facilitator” for a scheme initiated by highly-placed Venezuelan government officials and persons connected to them to enrich themselves at PDVSA’s expense.

“The purpose of the money laundering agreement in this case was to launder $1.2bn US dollars’ worth of funds embezzled from PDVSA by Venezuelan officials,” the agreement confirms.

“Until approximately May 2018, Krull was employed at a Swiss bank where he was a managing director and vice-chairman. Krull’s role was attracting private banking clients to the bank, primarily from Venezuela.” Described as a “door opener”, the private banker’s clients included other accused, and Venezuelan politicians and high net worth individuals.

The scheme exploited corruption in Venezuela’s foreign currency exchange systems, particularly the difference between that country’s government-run fixed exchange rate and the much higher “true economic” or market rate.

The skill lies in exchanging US dollars for Venezuelan bolivars at the market rate, and then converting the bolivars at the much higher government rate back into US dollars - a switch that could earn hundreds of millions of dollars.

“The difference between the fixed rate and the true economic rate creates opportunity for fraud and abuse, where Venezuelan officials engage in these foreign currency exchange schemes in return for bribes and kickbacks,” the Krull agreement states.

“These corrupt foreign exchange schemes occur in significant amount within Venezuela’s state-owned oil company, PDVSA. PDVSA is Venezuela’s primary source of income and foreign currency, and serves as the source of foreign currency used to fund corrupt foreign exchange embezzlement schemes.”

Krull’s admitted role was to launder the proceeds from these schemes, ensuring they appeared as legitimate earnings and transactions, even though new knew the funds “were the proceeds of criminal activity and bribery in particular”.

The monies involved were laundered through “fronts” designed to appear as legitimate businesses, such as real estate companies, securities/brokerage firms and mutual funds.

The original US government indictment, charging Krull and his fellow accused, provides a further Bahamas link. A confidential informant, acting on orders, instructed an unnamed Bahamian financial institution on February 24, 2017, to make a $5m investment into a “fake mutual fund structure”.

The funds were wired four days later, with the Bahamian bank said to be an institution “where a portion of the PDVSA funds were held” after being obtained via the corrupt scheme.

Corruption allegations have swirled around Venezuela’s political and economic elite amid the country’s ongoing economic and social collapse, with the IMF having predicted inflation could reach one million percent this year.

Economic mismanagement and a declining oil price resulted in the Maduro regime printing money to maintain social and public spending, resulting in a massively devalued currency and hyperinflation in a country with the world’s largest proven oil reserves. Millions of Venezuelans have voted with their feet by emigrating abroad in search of a better life.

Comments

Porcupine 7 months ago

The vultures who find the loopholes in these money transactions are parasites to the world. The financiers tout the idea they actually bring something valuable and worthwhile to the table, while doing nothing but using loopholes in laws to stuff their own pockets. If the whole "financial services" industry disappeared overnight, the world would be a better place. The idea that we would welcome those who have worked these financial shenanigans as "wonderful residents" says a lot about how far we've fallen in terms of decency. I truly despise the fact that these people are allowed to operate in such a careless and callous way, endangering whole economies while thinking nothing but their own selfish greed. Someday I hope, humans will grow up. We truly act like selfish children at present.

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