Fact Check: Argentina

850 days, 6 hours, 0 minutes ago

SINCE RUFO EXPIRED

Receive email alerts

Kicillof’s friend Diego: the Russian and Venezuelan connections

Yesterday, we reported on Diego Marynberg and the private bond transaction with the BCRA favoring his trading company, Latam Securities, a maneuver allegedly ordered by Axel Kicillof and his inner circle at the Economy Ministry.  When Juan Fabrega confronted Kicillof about the curious insider maneuver, according to published reports, Kicillof instrumented Fabrega’s downfall at the BCRA.

Kicillof’s friend Diego Marynberg currently lives in New York and has luxurious offices that face Central Park.  From there, the young Marynberg (he is 44, a year older than Kicillof) runs his operation, which has been linked to two of the Kirchner government’s most valued political and commercial allies: Russia and Venezuela.

It so happens that Diego was named as a witness in a 2012 legal dispute in London, involving two Russian-owned investment funds, Otkritie and Threadneedle, and several former employees of Otkritie. Threadneedle was accused of selling Argentine sovereign bonds to Otkritie at falsified prices, thereby defrauding Otkritie of US$175 million.

Marynberg testified that he was in contact with the defendants about serving as an intermediary in the sale of 1.65 billion bond warrants. He also claimed that when he learned that Threadneedle was planning on carrying out the maneuver at an off-market price, he withdrew from the transaction. He was not charged with any wrongdoing.

Nonetheless, Marynberg’s involvement in that case is noteworthy for a number of reasons. First, it demonstrates that among all the financiers capable of serving as an intermediary for a bond trade, Marynberg was singled-out by an obscure Russian fund that was plotting a fraud. And second, although he was charged with no wrongdoing, Marynberg’s involvement may have gone beyond the ultimately fruitless conversations about serving as an intermediary. Otkritie’s lawyers were concerned exclusively with the fraud committed against their clients, but they also alluded to the collaboration of other actors who enabled the crime:

 Argentinean Warrants are a relatively thinly-traded security and that it is implausible that the co-conspirators obtained the volume of Warrants used in the Fraud without the help of still-unknown co-conspirators.

 The commercial court of London awarded Otkritie $150 million in damages in 2014 over the fraud that momentarily starred Diego Marynberg.

Diego also has an ownership stake in Venezuela’s second largest banking institution: Mercantil Servicios Financieros CA, or Banco Mercantil. Mercantil Servicios Financieros is also the owner of a Florida subsidiary, Commercebank.

The precise scope of his ownership of Banco Mercantil is unknown. Media reports have described him as the owner (rather than one shareholder among many) through his fund Geo Equity Opportunities I Ltd, domiciled in the British Virgin Islands. According to Bloomberg News, the fund’s principal asset is Banco Mercantil. Marynberg is also the owner or officer in numerous companies whose names are English analogs of Mercantil Servicios Financieros.

But despite his ownership, neither Geo nor Marynberg have been mentioned in the Venezuelan press, which is dominated by the Maduro government, a close ally of Cristina Kirchner. None of the officers or board members who have been revealed to date can be otherwise tied to Marynberg. The same Bloomberg report that labeled Marynberg the owner of Banco Mercantil also refers to Geo as a US$90 million fund, far less than Banco Mercantil’s value.

WikiLeaks cables show that Banco Mercantil employees were in regular contact with the US embassy during the Chávez era, and were occasionally critical of the Venezuelan regime. However, Marynberg appears to have forged a productive relationship with Chávez and his successors. In a rare interview with Infobae in 2006, Kicillof’s favored financier hailed the potential of the Venezuelan economy and said market skepticism of chavista policies was exaggerated.

Diego’s ties to the Venezuelan government have also been juicy for his firm Adar Capital Partners, which is registered in the British Virgin Islands, a well-known tax haven, and is a member of the International Swaps and Derivatives Association (ISDA). The Central Bank of Venezuela (BCV) hired Adar to negotiate a contract with Goldman Sachs for a gold swap in 2013.

It is unclear why Venezuela’s Central Bank hired Diego’s firm for this task, given the lack of evident background in gold markets for either the firm, or for Diego. It’s also unclear why Venezuela couldn’t negotiate directly with Goldman Sachs, thus cutting out any role for Adar as a middleman. Adar was to receive a 0.25% commission. Given that the transaction value was in excess of US$1.8 billion, that meant a US$4.5 million payday for Marynberg.

Extracting phenomenal profits from his close friendships with political insiders is a great business for the young Argentine Economy Minister’s favorite financier.  And his reputation seems to be one of a skillful operator for deals that are carried out away from the public eye.