A Kazakhstan man, Ilyas Khrapunov, implicated in laundering hundreds of millions of dollars reportedly extorted from the largest city in Kazakhstan and an important bank, has recently assumed a consultancy role at his sibling’s litigation finance startup, Litigation Partners. The company, started by his brother, Daniel Khrapunov, in February, is based in Switzerland (Bloomberg Law).
Ilyas Khrapunov is alleged to have generated “shell companies for the sole purpose of laundering money,” with Daniel Khrapunov positioning his firm as specialized in complex litigation focusing predominantly on disputes stemming from former Soviet Union states. According to Khrapunov, the company has already successfully provided financial backing and overseen the execution of a claim, of the four currently active in Switzerland.
The capital for Litigation Partners reportedly originates from Daniel Khrapunov’s sale of Swiss-based real estate his mother procured in 2004. Viktor and Leyla Khrapunov, the parents of the Khrapunov brothers and former Almaty city officials, are currently in Swiss exile after absconding Kazakhstan in 2007.
Viktor and Leyla Khrapunov were convicted in absentia in 2018 for a fraud scheme that resulted in a loss of at least $300 million for the city of Almaty(Radio Free Europe). Both have received refugee status from the Swiss government, which found that their lives would be in danger if they returned to their home country.
The litigation finance industry, which involves investors funding lawsuits for a percentage of the potential reward, holds approximately $13.5 billion in assets globally. Despite scant regulations, disclosure demands are gradually increasing in some US courts.
Daniel Khrapunov was implicated in California real estate transactions linked to funds classified as traceable to several Kazakhstan business deals. Daniel and his sister, Elvira Kudryashova, were listed as managers of an LLC, 628 Holdings, utilised to purchase and manage property funded by allegedly stolen cash. The lawsuit was later dismissed in 2018 due to insufficient links between the allegedly stolen funds and California.
Daniel Khrapunov has refuted any wrongdoing, maintaining his full-time student status at a Swiss boarding school during the period when the transgressions allegedly occurred.
According to two New York judge rulings and an affidavit by Nicolas Bourg, Ilyas Khrapunov established a holding company, Swiss Development Group, catering to his parents’ and in-law’s, Mukhtar Ablyazov’s investments following their flight to Switzerland.
There is little push for regulation, unlike in the US where disclosure of litigation funding is currently a major topic at both the state and federal level. While there are very few rules governing this domain in Switzerland, Isabelle Berger, CIO at Swiss-based Nivalion, emphasised that it is prudent to align with industry standards.
For the detailed examination and developments regarding the litigation finance industry and the Khrapunov situation, see more here.