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January 30, 2017

How a Russian Banker’s $25 Million Bonus Led to 12 Years in Jail

Alaric Securities
  • Ex-Otkritie trader Urumov sentenced in $150 million fraud case
  • Wife Yulia Balk was acquitted of one count of money laundering

After a London judge told George Urumov he’ll spend the next 12 years in jail for cheating his employer out of almost $150 million, the former trader turned his head to the gallery to try to catch his wife’s eye.

Until two days earlier when Urumov was found guilty of fraud and money laundering and Yulia Balk was acquitted, their lives were intertwined in more ways than most couples bargain for. Parents of a six-year-old child, they both faced charges related to an intricate scheme orchestrated by Urumov and a couple of colleagues to siphon millions of dollars from Otkritie Financial Corp. through fraudulent Argentine bond trades and bonus manipulation.

Proceeds from the 2010-2011 scam were used to fund their luxurious lifestyles. For Urumov and Balk, in their early 30s at the time, that included paying for a 19 million-pound ($24 million) house on one of London’s most-prestigious streets. Their fairy tale of opulence ultimately proved short-lived when Urumov found himself at the center of a six-year legal battle that implicated his wife and has since left the former millionaire completely broke.

Last week, a jury let Balk walk free and Urumov, now 37, was handed one of the longest sentences ever received by a banker for fraud in the U.K. Vladimir Gersamia, formerly of Threadneedle Asset Management, was also slapped with a seven-year jail term.

The tale of how Urumov went from being a star trader whose CV boasted stints at HSBC Holdings Plc and Lehman Brothers Inc. to a criminal entangled in what a judge three years ago dubbed “a brazen and carefully orchestrated deceit” begins and ends with greed.

Stealing Money

The year before Urumov started stealing money from Moscow-based Otkritie, he earned $2 million including bonuses as executive director for emerging markets fixed-income at Knight Capital Europe Ltd. in London. If he hadn’t exited that contract early to join the Russian lender in 2010, Urumov’s gross pay would have topped $10 million.

But the Cass Business School and London School of Economics alumnus had a bigger reward in mind. Within months of joining Otkritie to expand its fixed-income division to London, Urumov had swindled close to $40 million for himself.

By that point Urumov, who was born in 1979 in Ossetia, then part of the Soviet Union, made a name for himself as a nimble and clever trader. He managed a five-member team at Knight Capital and was revered among peers in the City of London. Lawyers for the prosecution described Urumov as a “forceful personality” whose gushing self confidence enabled him to carry out the fraud surreptitiously.

$25 Million Bonus

Underpinning his audacious pursuit of wealth, prosecutors said Urumov requested a $50 million signing-on bonus from then Otkritie Chief Executive Officer Roman Lokhov over a meal at London’s Coq D’Argent restaurant, in exchange for moving his team at Knight Capital to the Russian lender. Lokhov eventually agreed to half that amount, assuming Urumov would split the sum evenly with the four bond traders he was bringing with him.

But Urumov had a cunning plan, according to testimony heard during the four-month trial. He kept more than $20 million for himself, of which $12 million went to pay off bribes to two Otkritie employees who helped him get the job. One of the men, Sergey Kondratyuk, was convicted in Switzerland of fraud and released in 2013 after serving a short prison term. Prosecutors believe the other, Ruslan Pinaev, is living in Israel and has so far evaded extradition to Switzerland.

Then, barely five weeks into his new post, Urumov and his colleagues started telling their bosses they were trading Argentine warrants, a type of derivative, in dollars when in actuality the deals were executed in pesos.

Fradulent Trades

The Argentine currency was running at about four to the greenback when the trades took place in 2011, so Otkritie paid four times too much, and the men walked away with $100 million of illicit earnings. The jury heard how they covered their tracks by changing the currency listed in electronic records and even convinced Gersamia at Threadneedle to confirm the false valuation.

The money was funneled through offshore bank accounts and the men splurged their ill-gotten gains on Ferraris, pink and yellow diamonds, and luxury properties. Urumov and Gersamia were arrested and charged in 2015 along with former Otkritie trader Alessandro Gherzi, who was cleared of any wrongdoing last week. The Russian bank, meanwhile, has recovered more than $100 million in damages.

At his sentencing Friday morning, Urumov was clad in a disheveled overcoat and looked resigned to his fate. It was a sharp contrast to the smart casual attire and radiating confidence he’d exhibited while trying to convince the jury that he was a victim, blackmailed by his colleagues. Urumov’s lawyer, David Campbell, didn’t respond to an e-mail requesting comment.

Greedy Motivations

In the end, Urumov’s attempts to absolve himself fell on deaf ears. In her closing remarks, Judge Deborah Taylor accused him of creating a “smoke screen of falsehoods” and denounced his “disdain and disregard.”

A few minutes later Urumov locked eyes with his ashen-faced wife seated in the back of the London courtroom. The two married in 2007 after studying together at LSE and had a child in 2010 just before the fraudulent plot was conceived. The one charge against Balk, linked to money laundering, was dropped. But the consequences of Urumov’s greed were abundantly clear. A trader who once earned millions in legitimate salary is on course to spend his forties in jail and, according to his lawyer Henry Blaxland, his family now lives off the financial support of relatives.

“You Urumov were at the center of this series of conspiracies, and motivated yourself by greed,” Judge Taylor said.

Article originally published by Jeremy Hodges at