Business » Companies
Author`s name Dmitry Sudakov

Graff Diamonds' mafia connection revealed in Russia may lead to major international scandal

It may seem difficult to imagine that the Member of the Order of the British Empire Lawrence Graff and his heirs have something in common with the Russian organized criminal group called Sevastopol. But apparently the famous jewelry house has learned, which people can hide behind big money moving from Russia to offshore jurisdictions. Graff Diamonds is appeared to be linked to Russian mafia-related businessmen, as reported by Versia, the leading Russian investigative media since 1998. This story deserves to be told in full detail.

Cyprus as a starting point for Russian money

At the end of May 2015, a huge celebration took place in Limassol, Cyprus, in honour of the Grand Opening of a jewelry boutique Graff, a franchise of the British company Graff Diamonds Ltd, founded in 1960 by Sir Lawrence Graff. This magnificent event was attended by hundreds of high-ranking guests, including President of Cyprus Nikos Anastasiadis and also executive directors of Graff Diamonds Ltd, François Graff and Elliot Graff.

The Graff partner in Cyprus was Rustem Magdeev, the Russia-born entrepreneur with Cyprus passport. He seemed to be well connected in Europe and especially in Russia, as he used to be an adviser to Rustam Minnikhanov, the President of Tatarstan, the wealthy region in Russia with Muslim majority. Rustem Magdeev and his son Ernest Magdeev were managing the Equix Group Ltd., which runs the Graff franchise.

Some of the Graff Grand Opening guests flew to Cyprus by private jet purchased by Equix Group. They were taken from the airport to the newly built Marina of Limassol by luxury Rolls-Royce limousines, crafted by English masters by special order of Equix Group. Louis Roederer Cristal champagne, white and red wine from the leading French chateaux flowed like water. Jewels worth more than 1 billion euros, specially brought for the event, were under protection of the special police department of Cyprus.

Then, in May 2015, nobody couldn't predict that in a couple of years Graff Diamonds Ltd, a company with a worldwide crystal clear reputation, would participate in an international scandal, heroes of which would become well-known Russian entrepreneurs, as well as their patrons from the crime rings. 

Intoxicating success of Graff

According to Versia, Equix Group Ltd invested more than 10 million euros in the construction of the Graff boutique in Cyprus. Furthermore, about 110 million euros were spent on the purchase of jewelry. From documents on open access we learned that Graff Diamonds Ltd was able to sell the jewelry with an enormous discount of 60%!

Business looked promising, especially considering the fact that by 2015 the Republic of Cyprus coped with the consequences of the banking crisis and became attractive to foreign capital. In Limassol they began to build the first casino in the history of Cyprus, integrated into the largest hotel complex. The authorities have opened a program for obtaining citizenship in exchange for investment. Among the owners of the new Cypriot passports there were immigrants from the CIS countries, China and the Middle East countries, known for their passion for the jewelry made by the Graff.

By the end of 2015, the Graff boutique in Limassol sold jewelery for tens of millions of euros. Cypriot success helped the representatives of the Equix Group Ltd to agree with the owners of Graff Diamonds Ltd on opening of another European franchise in Vienna. The decision was absolutely unprecedented, as the company of Sir Lawrence Graff had never given before the franchise rights on the territory of the continental EU. This decision led to an unimaginable scandal.

Chain reaction after financial breakup

Graff Diamonds Ltd agreed to hand over the franchise in the capital of Austria to the Equix Group Ltd on a condition that the partner raise investments in the amount of $50 million. After that, one of the undisclosed founders and a former shareholder of the Cypriot company went to Moscow to discuss this condition with its investors. Initially, the consortium of the investors of the Equix Group Ltd accepted the offer, but they didn't manage to come to an agreement. The reason for this failure, apparently, was a well-known Russian-Cypriot entrepreneur Rustem Magdeev.

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Francois Graff and Elliot Graff at the Graff opening in Limassol

In January 2016, Magdeev, who at that time had already invested in Equix Group Ltd, made a "default" on his obligations. This happened because Magdeev could not return other investments that he made in 2013 in the Cyprus company V.M.H.Y. Holdings Ltd, through his company called Ashaja Investments. The company was under control of the infamous Russian banker Andrey Vdovin, who is arrested in Russia by default, being under current investigation for a number of financial frauds

Financial difficulties of Rustem Magdeev launched a "chain reaction" in the Equix Group Ltd. In February 2016, the founders of the Cyprus company had to give away their shares to another investor, a citizen of the Republic of Azerbaijan, the Russian Federation and the Republic of Cyprus, Emil Gainulin. Most likely, Mr. Gainulin was afraid of reaction of Magdeev, and therefore he sold his option Equix Group Ltd in exchange for the investment.

Starting from next month, the company-owner of the boutique Graff in Limassol focused on the selling of remaining commodity. Graff Diamonds Ltd completely stopped buying new jewelry items. The investment program of the Equix Group Ltd, which had planned to open numerous well-known European brands in the Marina of Limassol, was frozen. By that time, the control over the operating activities of the Cypriot company had passed to the hands of Ernest Magdeev who was the son of Rustem Magdeyev and also to the administrator, appointed by Mageevs, Russian citizen Vladislav Slizikov. This administrator, as may seem from the analysis of his activitiy, didn't have any relevant experience for working with staff. As a result of his actions, the company lost many qualified employees.

Lawyer from Cyprus and "fellows" from Sevastopol gang

In May 2017, when the situation in the Equix Group Ltd became critical, Rustem Magdeev decided to address to the lawyer Michalis Kyriakides, owner of the law office Harris Kyriakides. Kyriakides was a professional liquidator who later became famous for his case against Ukrainian oligarch Rinat Akhmetov (#1 in Forbes billionaire list in Ukraine). At the end of 2017, the Cypriot court froze Akhmetov's assets worth $820 million. In June 2018, the court annuled this decision, highlighting that there were no reasons for freezing the assets.

Kirakaides enthusiastically started out the liquidation of the Equix Group Ltd. Almost all of the the remaining staff was put out on the street. The process of the sale of the property and the assets at giveaway prices began. As reported, the lawyer himself became the owner of the luxury Rolls-Royce cabriolet, which was designated for the customers of the Graff boutique in Limassol. Along with the liquidation, Rustem Magdeev tried to sell his stake in the Equix Group Ltd to its former owners. It seems that he did not do without the support of "authoritative" friends from Russia.

Versia's investigators found that on May 17, 2017, a private jet landed at Larnaka airport, on board of which there was an impressive delegation headed by Mr. Magdeev and the citizen of the Russian Federation Radik Yusupov. Mr. Yusupov, according to Business Online from Tatarstan, is well known criminal by his nickname "Dragon". Allegedly he is the leader of the organized criminal community "Sevastopolskiye" ("From Sevastopol" in English, named after Moscow's hotel Sevastopol, that had been the headquarters of the gang). This is the largest criminal network not only in the scale of Tatarstan, but also in the scale of whole Russia. There are dozens of murders, kidnappings and other serious crimes on the account of the "Sevastopolskiye".

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Copy of Rustem Magdeev‘s court charge, listing Graff jewelry and diamonds which belong to Magdeev after termination of operation

Radik "Dragon" Yusupov was sentenced in 2011 in Russia to 8 years for organizing of a series of murders. He was released from prison on probation in 2016. It was just revealed in Russian media that Rustem Magdeev had started his career in Tatarstan in a gang, which was a part of Sevastopol crime community, led by Dragon. In April 2018, the online newswire Wek reported that Rustem Magdeev was nicknamed as «Broiler», when he was in a gang. In his early years of entrepreneurship Magdeev was responsible for distribution of fake vodka, produced and bottled underground by gangsters in the beginning of 90s.

As part of the working visit to Cyprus, Rustem Magdeev and Radik "Dragon" Yusupov held a number of negotiations with undisclosed co-owners of the Equix Group Ltd. The purpose of these negotiations was to compel the company to repurchase Mr. Magdeev's interests for more than $40 million, but the negotiations failed to succeed. It is believed that appearance of Radik "Dragon" Yusupov in the dispute proves his personal financial interest in this Graff venture, represented by former gang ally Rustem Magdeev. 

Meanwhile, the actions of the liquidator, Mr. Kyriakides, were not approved by Emil Gaynulin, another shareholder and investor of the Equix Group Ltd. According to Russian media, on June 22, 2017, Mr. Gaynulin allegedly made an effort to release his option by taking out part of the Graff Diamonds Ltd's products in the boutique's safe. The jewels were transported to the depository of the Bank of Cyprus, located near the Marina of Limassol. The actions of the shareholder caused a sharp reaction from Rustem Magdeev and his partners. Radik Yusupov came to Cyprus personally to protect his investments and to "solve the issue". As a result, the jewels returned to the boutique's safe and the case went on a legal level. Meanwhile, Versia investigation showed the connection between Rustem Magdeev and suppliers of the precious stones from Columbia. It was reported that Ernest Magdeev, who was officially involved in Equix Group/Graff franscise, was sending around the private offer on Columbian emeralds, in the same time as Graff was launched in Cyprus. As Wek revealed, there is strong evidence that these stones and even replicas of Graff jewelry could be sold to some clients of Equix Group in 2015-16, primarily from Russia. This is not the first claim, when Russia-origin businessmen are involved in illegal operations with famous luxury brands. Wek also refers to loud scandal with Graff's Russian partner, Mercury Group operating TSUM in Moscow, where counterfeit and fake luxury watches and jewelry, estimated in millions euros, were seized by Custom Office

Gang is back in June 2018

On July 2017, hired by Emil Gainulin Cypriot lawyers from the company George Yiangou attempted to resist Mr. Kyriakides's actions and achieve his deprivation. However, this attempt was also ineffective, since Radik Yusupov and his protege from Chechnya, Shamil Ediev (better known as "Sultan"), rejoined the negotiation process. Mr. Gaynulin had to admit his defeat and leave the Equix Group Ltd under control of Rustem Magdeev and his assistants, Vladislav Slizikov and Michalis Kyriakides.

After that, Rustem Magdeev decided to diversify the possible risks. Executive director of the Equix Group Ltd Nakis Anastasiou was forced to sign a number of fictitious documents. As a result, part of the goods produced by Graff Diamonds Ltd went directly to Magdeev. At the end of July 2017 the jewels were taken to Switzerland, to a free port located on the territory of the Geneva airport. After the transportation the company Equix Group Ltd was left only with goods belonging to Emil Gaynulin.

By the summer of 2018, Equix Group Ltd had completely gone out of business. First, the shop of Iranian carpets, "Shiraz Carpets", was closed. Than there occured some problems with the service of the Halcyon Gallery of Contemporary Art. The only major customer of the Graff boutique was Dragon's associate Shamil Ediev. He took out the goods worth about 3,5 million dollars. This could be a kind of "payment" for the services by Mr. Gaynulin in July 2017.

It may seem that the story of confrontation of investors and shareholders of Equix Group Ltd is over on that point, but in June 2018 the conflict suddenly continued. An entrepreneur from Kaliningrad Alexei Streletsky and his offshore company Stream Ventures Ltd filed a lawsuit. One of the defendants was law office Areti Charidemou & Associates. This company carried out state registration of the Equix Group Ltd in late 2014 and it was its only executive director.

It turned out that at the end of 2016, Stream Ventures Ltd invested more than $5 million in products of Graff Diamonds Ltd. It was planned to release these products in Graff boutiques in Limassol and Vienna. This not a routine type of investments in jewelry business, according to the sources of Versia. It is curious that the interests of Mr. Streletsky and Stream Ventures Ltd were represented also by Michalis Kyriakides.

Stream Ventures Ltd is known for lawsuits in the UK against TIB Investments Ltd, which previously ran the Russian commercial bank Trust, transferred to the rehabilitation of the Russian banking group Otkrytie in December 2014. The company Stream Ventures Ltd "lost" more than $ 20 million as a result of the decision of the Central Bank of the Russian Federation, the sum which was invested in 2011-2014 in the credit notes of the Bank Trust. The owner of the Stream Ventures Ltd, Mr. Streletsky, known as the owner of the Guards Meat Factory in Kaliningrad and a failed builder of the pedestrian bridge across the Pregol River.

Alexei Streletsky himself is no more than a nominal person who covers the ultimate beneficiary, Russian citizen Pavel Parshikov. Parshikov is a former official of the central apparatus of the Ministry of Internal Affairs of the Russian Federation, who in 2004-2006 took part in the contraband of consumer goods from the Middle East to Russia. It is clear, that this duo Streletsky-Parshikov is linked to Rustem Magdeev and Radik "Dragon" Yusupov. The Graff's Cyprus "adventure" continues.

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