Four Gazprombank executives pocketed over €9 million by exploiting market chaos triggered by sanctions against Russia

Four senior managers at Gazprombank’s Luxembourg branch made more than nine million euros in profit by exploiting market turmoil that followed sanctions imposed on Russia after its full-scale invasion of Ukraine in 2022, the Financial Times reports.

The sanctions cut off many Russian investors from payments on Eurobonds — bonds issued by Russian companies in foreign currency. In response, Vladimir Putin signed a decree allowing Russian companies to issue substitute bonds in place of their Eurobonds.

The Financial Times identified the four directors as Dmitry Derkach, Sergey Nekrasov, Sergey Belousov, and Pavel Bolshakov. According to the newspaper, they took out at least 17 million euros in personal loans from their employer and used the money to buy up Gazprom bonds trading at steep discounts on the European market. They then swapped the bonds in Russia for new ruble-denominated bonds at 100% of face value.

The four men carried out more than 50 such transactions that, by the newspaper’s calculations, could have earned them more than nine million euros in profit.

The men coordinated their trades, buying identical quantities of the same bonds on the same day, often before Gazprom’s website had even announced that a substitution was available. According to sources familiar with the deals, Gazprom would announce which bonds were eligible for exchange at the last moment, giving buyers only about two weeks to act.

Gazprom stated the bond exchanges involved the sanctioned National Settlement Depository. A European Union official briefed on the findings of the inquiry said this “sounds like circumvention” of sanctions and “needs to be subject to a criminal investigation in Luxembourg.”

Western financial market participants generally viewed the bond substitution mechanism with great suspicion, the Financial Times writes. “This whole environment created, indeed, opportunities for abuse,” said a source familiar with the workings of Clearstream, Luxembourg’s central securities depositary that settles bond transactions.

Gazprombank’s Luxembourg branch stated it had “strictly” complied with “laws, rules and regulations” and “was never involved in violation of the EU sanctions.” Derkach also categorically denies any wrongdoing. “The absence of any material findings by the Luxembourg banking regulator following a very detailed inquiry […] shall conclusively settle that there was nothing unlawful in connection with this matter,” he said.

All four have since left Gazprombank. Derkach said he now leads a “private life in Luxembourg.” Belousov and Bolshakov run the investment firm B&B Capital Partners there, while Nekrasov returned to Russia to become general director of the Spartak Moscow football club.