Ukrainian bank Concord has become part of an international scandal involving Russia, illegal online gambling, and drug trade.
On Sept. 24, the Russian public movement Stopnarkotik (Stop Drugs) asked Russia’s Central Bank and the Ministry of Interior to ban payments from Ukraine-based bank Concord, cryptocurrency exchange Exmo and Russian payment provider Qiwi.
It accused them of accepting payments from one of the world’s largest drug trading platforms, Hydra.
The U.S. Treasury believes that over 40%, or $370 million, of the transactions taking place at Seux are linked to cybercriminals, including those trading on Hydra.
Concord’s cofounder Olena Sosyedka told the Kyiv Post that her bank “has nothing to do with Hydra nor the cryptocurrency broker Suex.”
Sosyedka and Exmo’s chief business development officer Maria Stankevich said that their companies are victims of cybercriminals who demanded a ransom in cryptocurrency from them.
“Our bank refused to pay the ransom, so cybercriminals started spreading online fakes,” Sosyedka said.
Who is who?
The Stop Drugs movement was founded in 2014 by Sergei Polozov, the deputy of the Moscow City Council and lawmaker from Vladimir Putin’s party United Russia. As of today, it claims to have over 10,000 members and 79 regional branches.
To support its claims about Concord, Stop Drugs cited Russian Telegram channel BadBank, which writes about banks serving illegal online casinos in Russia. The channel, founded in 2020, is owned by Latvian citizen Janis Kuda, the head of the U.K. firm First Chaordic Order.
However, industry experts said that a prominent Russian hacker and founder of payments firm ChronoPay Pavel Vrublevsky controls BadBank.
According to BadBank, Concord Bank, Qiwi and Exmo are connected to the Russian-Czech cryptocurrency exchange Seux, sanctioned by the U.S. Treasury Department on Sept. 21 for helping cybercriminals to launder ransomware money.
With assets of over $160 million, Concord ranks 39th among 73 Ukrainian banks. Nearly $23 million of its revenue in the first half of 2021 came from internet acquiring services that enable online payments using bank cards or internet banking.
Concord came under scrutiny because it accepts high-risk transactions and high-risk legal payments, like gambling or betting.
Sosyedka told Forbes that high-risk operations include all transactions in which a customer can demand their money back from the bank, like buying airline tickets.
High-risk transactions can lead to money laundering. The National Bank of Ukraine requires financial companies to check the background of their clients.
In March 2018, the NBU fined Concord $58,000 for being too “negligent” with the transactions of its high-risk clients. In October, the NBU fined Ukraine’s Ibox Bank and financial company Leogaming Pay for similar violations.
Concord blames cybercriminals
Sosyedka told Forbes that her bank received threats from cybercriminals because it works with high-risk payments.
Cybercriminals also threatened a significant cryptocurrency exchange in Eastern Europe Exmo, Stankevich said.
She denies Stop Drugs’ claims about the company’s links to Hydra. “Exmo checks the background of its clients and traces every transaction, so the bank cannot be involved in money-laundering or accepting payments for drug trafficking,” she said.
However, Exmo has links to Seux. Five years ago, Exmo’s founder Ivan Petukhovsky transferred $4,000 to Egor Petukhovsky, his namesake and Suex cofounder.
Stankevich said that this transaction occurred before Suex’s creation in 2018, which means it’s not related to the company.
Qiwi said that it has no connections either to the Ukrainian bank or Exmo. It stressed that it operates within Russian laws and does not carry out illegal activities.
Who’s behind threats?
Sosyedka and Stankevich point their fingers at Vrublevsky.
“With his intimidation and threats, Vrublevsky wants to get money from entrepreneurs,” Sosyedka said.
She also blames Telegram channel BadBank, which allegedly belongs to Vrublevsky, for igniting Concord Bank’s scandal.
“This is how the so-called ‘reputational blackmail’ works: the media spreads accusations that are not proven, but they are so scandalous that provoke public discussion,” she added.
Stankevich agrees: “Vrublevsky’s posts contain a lot of big names. However, they make no sense and are very provocative,” she told the Kyiv Post.
Vrublevsky’s response is: “We did not blackmail anyone.”
He said that there is no evidence confirming Concord’s involvement in drug trafficking.
“However, there is an assertion that the bank is engaged in all sorts of troubling activities, including its open support of illegal casinos,” he told the Kyiv Post.
According to Vrublevsky’s sources, the National Bank of Ukraine has already started an unscheduled inspection of Concord Bank. Vrublevsky claims that it was the U.S. who asked to investigate Concord’s links with Suex.
The NBU’s press service said that it is aware of Concord’s case, but it hasn’t responded to Kyiv Post’s request for comment as of the time of the publication.
Exmo has already asked the media that wrote about the case to remove all the “accusations” regarding the company.
“If Stop Drugs doesn’t recall the letter to the Russian Central Bank, we will sue them,” Stankevich said.
In Ukraine, Concord has also appealed to law enforcement agencies. “But it takes more time to obtain court decisions than to publish fakes online,” Sosyedka said.
