CINCINNATI — As developers toil to turn the former Tri-County Mall into an upscale apartment community, a city and bank in Kazakhstan are asking a federal judge in New York to help them recover $30 million lost at the mall in a 2013 money-laundering scam.
Their lawsuit alleges money stolen from BTA Bank in Almaty, Kazakhstan, was laundered in a court-ordered sheriff’s sale by a limited liability company that concealed its true ownership from the Hamilton County court system.
Developer Michael VanHuss said the controversy would not impact his ability to obtain financing for the $1.1 billion Artisan Village project. Former FBI agent Kerry Myers agreed the property is protected from liability.
“The fraud goes with the perpetrator not with the property,” said Myers, an assistant professor at the University of South Florida who teaches forensic accounting and business law at the Muma College of Business. “They can recover money from the defendants if they get a judgment. But they’re not going to be able to come in and claim the land.”
Myers said the case shows how easy it can be for international money launderers to avoid detection by shifting cash between limited liability companies in different countries.
“It is a problem in the system,” Myers said. “As you move to different countries, that makes communication among investigators much more difficult.”
Beyond that, Myers said the case is just a fascinating story.
“It’s got everything,” Myers said. “It’s got a hunting accident. It’s got murder. It’s got, you name it. Someone ought to make a documentary out of this. It’s got, Donald Trump. It’s got a little bit of everything involved in it.”
The case centers on the exploits of Felix Sater, a convicted felon turned government informant who has helped the FBI catch mobsters and the U.S. military find Osama bin Laden, according to court records unsealed in 2019.
Sater is best known for helping the Trump Organization pursue a licensing deal in Moscow for a skyscraper. This pursuit attracted the attention of multiple investigations into Russia’s interference in the 2016 presidential election.
The Tri-County Mall accusations are part of a broader conspiracy claim in which Sater allegedly worked with former BTA Bank Chairman Mukhtar Ablyazov and the family of former Almaty Mayor Victor Khrapunov to conceal and launder $440 million that was subject to worldwide freezing orders.
The former president is not named as a defendant, but the lawsuit alleges Sater helped the Khrapunov family launder “more than $3 million through the Trump SoHo project in New York.” According to the complaint, Sater was working as a senior advisor to the Trump Organization when the 46-story condo tower was built, but there is “no suggestion” that Trump knew stolen funds were being used in the project.
A 2015 lawsuit against Ablyazov is scheduled for trial in November, while Sater’s case has an Oct. 17 hearing to discuss the next steps in the case.
All three defendants deny the money-laundering allegations in court filings. Ablyazov and Khrapunov have claimed to be the victims of political persecution.
Sater told BuzzFeed News in 2020 that he purchased Tri-County Mall’s debt in 2013 with Khrapunov’s money, but he denied the transaction amounted to money laundering.
“These were legit transactions,” Sater said. “That’s why they were in my own name. Professional money laundering, you really don’t money launder using your own name unless you’re just a complete moron. You know you rob a bank. Try not to leave your business card behind.”
According to the lawsuit, Sater formed a limited liability company to purchase the mall’s $204 million mortgage, which Wells Fargo Bank sold at a discount as it pursued a foreclosure in Hamilton County. But he took several steps to conceal his involvement in the deal, including:
- Sater made a business associate, Daniel Ridloff, the managing director of Tri-County Mall Investors LLC because “Sater’s notorious criminal background would have raised a red flag to counterparties in a deal of this magnitude.”
- Ridloff submitted a “materially false” bid package to a real estate advisor for Wells Fargo that failed to disclose the involvement of Sater and Ilyas Khrapunov, Ablyazov’s son-in-law and Victor Khrapunov’s stepson.
- Sater and Ridloff “submitted false documents to the law firm representing TCMI in the Tri-County Deal in order to move nearly $30 million in stolen funds into the real estate law firm’s escrow account for the purchase of the note.”
Hamilton County records show Daniel Ridloff’s signature on a loan sale agreement dated May 23, 2013. But nowhere in the local court record does it say what allegedly happened the day before the loan was sold.
“The mortgage broker’s role in helping TCMI obtain financing abruptly ended on May 22, 2013, when the mortgage broker received the background investigation report commissioned on TCMI and its parent companies,” said the federal lawsuit. “Sater has testified that the background investigation report revealed ‘fronts for (Ilyas) Khrapunov.’”
That meant the money for the transaction didn’t come from a loan, but from an account controlled by Khrapunov, according to the complaint.
Hamilton County records show American Pacific International Capital Inc. bought the mall for $45 million at a court-ordered sheriff’s auction on July 18, 2013.
“Importantly for the conspirators, the funds from the resale of the note were to be paid by the county sheriff that auctioned the note into an account designated by TCMI. This arrangement effectively laundered nearly $30 million in stolen funds with a 50% profit,” said the federal complaint.
Tri-County Mall Investors LLC was represented in the Hamilton County sale process by Stephen Griffith and other attorneys from the Taft law firm. Griffith referred the I-Team’s questions to the New York attorneys pursuing claims against Sater.
Hamilton County’s sheriff declined to answer questions about the 2013 transaction.
Myers said the Tri-County Mall case is probably not a sign of systemic problems in Hamilton County.
“I teach money laundering. It’s my expertise,” said Myers. “I’m currently not aware of any other money-laundering transaction in the state of Ohio. I think it’s probably a one-off incident.”
He also said it’s a lot to expect from court officials to spot this kind of fraud.
“Did the sheriff have a legal duty to go further and investigate whether or not the debt he was foreclosing on was purchased from the proceeds of an embezzlement from Central Asia? No, the law does not put the sheriff under that duty,” Myers said.
Myers said that two laws passed by Congress in 2020 should make it easier for the FBI and Treasury Department to uncover this type of fraud.
Although rules are still being developed by the Financial Crimes Enforcement Network, companies will soon be required to provide ownership details to FinCEN “whenever someone starts an LLC,” Myers said. “It’s going to be helpful and easier for FBI agents, treasury agents, FinCEN and investigators to be able to see what’s going on.”