NEW YORK FEDERAL COURT SANCTIONS ILYAS KHRAPUNOV IN THE CASE BROUGHT BY BTA BANK AND THE CITY OF ALMATY

NEW YORK FEDERAL COURT SANCTIONS ILYAS KHRAPUNOV IN THE CASE BROUGHT BY BTA BANK AND THE CITY OF ALMATY

The United States District Court for the Southern District of New York on 4 May 2022 imposed sanctions of $221,285.31 against Ilyas Khrapunov for his repeated violations of court orders, destruction of evidence, and lies to the Court.  Payment is due within 30 days.  This is the second time the New York court has imposed monetary sanctions on Khrapunov, the first coming after he leaked confidential testimony on-line, and at least the sixth time that the Court has found that the defendants engaged in improper litigation conduct.  Khrapunov’s co-defendant, Mukhtar Ablyazov, was previously sanctioned in the amount of $140,115.60 for similar misconduct.

This week’s order fixed the amount of sanctions owed by Khrapunov, and follows the 19 May 2020 decision of Magistrate Judge Katharine Parker, which was upheld by the 18 October 2021 decision of then-District Judge Alison J. Nathan, which found that Ablyazov, Viktor Khrapunov, and Ilyas Khrapunov had obstructed BTA Bank and Almaty’s discovery of evidence “highly relevant” to their claims against Ablyazov, the Khrapunovs, and the shell company Triadou SPV S.A., for laundering tens of millions of dollars into the United States.  The Court found that the defendants had hidden evidence, intentionally destroyed evidence, testified untruthfully, violated court orders, and treated the litigation as “a game of cat and mouse.”

Among the specific misconduct underlying this week’s sanctions award, the Court previously found that:

  • The Khrapunovs “failed to produce any financial records,” “all without any excuse whatsoever.”
  • Ilyas Khrapunov – who the Court described as “the primary abuser of discovery” – deleted “all” of his emails shortly before BTA Bank and Almaty’s lawsuit was filed, began using “hundreds” of encrypted email accounts instead, and then “incredibly” claimed that he could not access any of them.
  • Ilyas Khrapunov also refused to identify emails that he had himself sent to third parties, and “denied any memory of financial transactions that involved tens or hundreds of millions of dollars.”

Previously, Judge Parker concluded that “the Khrapunovs, and particularly Ilyas, have violated numerous [legal] obligations,” “admitted to deleting” evidence, and falsely claimed not to be able to access other evidence.  The Court likewise found that “the Khrapunovs have violated various court orders in this case,” beginning with Ilyas Khrapunov’s unauthorized leaking of confidential testimony. 

The U.S. Court also found that Ilyas Khrapunov “was the leader in determining how he and his father would participate in this litigation,” and “has been ‘the face of the Khrapunovs’ throughout the litigation and no doubt the individual who made decisions and directed counsel.”  The Court therefore found Ilyas Khrapunov liable for both his and Viktor Khrapunov’s misconduct.

In this week’s decision, Judge Parker complimented the legal team representing BTA Bank and the City of Almaty, calling them “prepared and skilled advocates,” and held that “to the extent Ilyas Khrapunov complains about the total amount of fees sought, this is result of his own failures to comply with discovery, which spawned extensive motion practice.”

Matthew L. Schwartz, managing partner of Boies Schiller Flexner LLP and counsel to the plaintiffs, said: “The City of Almaty and BTA Bank appreciate the Court’s careful supervision of this matter.  Mukhtar Ablyazov, Ilyas Khrapunov, and their associates have repeatedly refused to honestly participate in the court process and have violated numerous court orders.  Even so, the evidence of their crimes is extensive.  We look forward to presenting that evidence before a jury of New Yorkers.”

The New York proceedings on behalf of the City of Almaty and BTA Bank were initiated more than six years ago accusing Mukhtar Ablyazov and his criminal associates of laundering stolen money into the United States.  As courts throughout the world have already found, Ablyazov looted billions of dollars from BTA Bank through the issuance of sham loans – conduct for which he has already been convicted and sentenced in Kazakhstan, and found civilly liable in the United Kingdom courts.  In the U.S. proceedings, the plaintiffs have gathered additional substantial evidence of Ablyazov’s crimes, along with securing the testimony of numerous witnesses to those crimes.  Trial is presently scheduled to begin before a U.S. jury in New York City in Fall 2022.