On 27 February 2020, the competent court in Duesseldorf, Germany, entered a landmark ruling in a remarkable criminal case around illegal payment processors. The German Paul Lopatin, one of the ultimate beneficial owners (UBO) and manager of companies providing unauthorized payment services to scammers such as StronIT, TrustSecure, Queen World, or SecurityPort stood trial for charges of money-laundering and facilitating investment fraud. The court considered it proven that Paul Lopatin and these payment processors had provided unauthorized payment transaction services, facilitated fraudulent broker scams, and hence was engaged in money-laundering.
The Case in a nutshell
Paul Lopatin has used dozens of companies (fake companies) to open hundreds of accounts with German banks such as Postbank, Commerzbank or Deutsche Bank. He sold this bank account as so-called “premium bank accounts” to scammers. Made in Germany is a quality statement even in the cybercrime scene. One may rightfully conclude that Anti-Money-Laundering (AML) and Know-Your-Customer (KYC) checks were not carried out properly by the involved banks either. Lopatin operated more than 150 accounts at the German Postbank alone. Apparently nobody at the involved banks noticed that funds from retail investors of broker scams were wired to construction companies or IT firms. In some cases, the respective scam brands were provided as a payment reference. Ridiculous, isn’t it?
Facilitating scam brands
Among the clients of Lopatin’s illegal payment processors was the cybercrime organization of the Israeli Gal Barak and his E&G Bulgaria which operated big scam brands such as XTraderFX, SafeMarkets, OptionStars, or Golden Markets. The German regulator BaFin had last issued an investor warning against one of these companies, Queen World GmbH, in July 2019.
Queen World GmbH accepts funds from private persons into its business accounts and transfers these funds to various foreign accounts belonging to companies that are predominantly domiciled abroad. In doing so, Queen World GmbH is conducting money remittance business without the required authorisation from BaFin. At this stage of the investigations, BaFin assumes that the transferred funds are funds from customers of unlicensed online trading platforms, such as www.fxtrader.com.BaFin investor warning published May 24, 2019
4-Years Prison Term
Paul Lopatin was sentenced to four years in prison. The German prosecutor charged him with 365 counts of illegal payment transactions executed between March 14, 2018, to February 8, 2019. According to the indictment, Lopatin was alleged to have set up German bank accounts for online investment fraudsters or scammers. These accounts were used to receive payments from customer victims and forward them to the fraudsters and scammers.
In return, the companies of the defendant received between 6 and 8 percent commission on the investment amount. In total, it is said to have processed €3.4 million in payments and collected €204,000 commission for this. One of the accounts to which money was paid was that of a Queen World GmbH at Postbank, IBAN DE12 1001 0010 0924 4921 07.
In the end, Lopatin was convicted of money-laundering, provision of unauthorized payment services, and facilitation of investment fraud in 136 cases. In addition, 50,000 Euro were confiscated and will be paid to a private party to the criminal complaint.
EFRI files money-laundering complaints
Similar court cases are currently underway in various jurisdictions. We can expect the judgments to be made in the period following the COVID-19 pandemic. In the meantime, the European Funds Recovery Initiative (EFRI), co-founded by FinTelegram, will continue to file appropriate money laundering complaints against the banks and payment service providers involved. Early March 2020, EFRI filed a respective money-laundering complaint against German Wirecard for facilitating dozens of investment fraud with their payment services.
Law enforcement and authorities must be enabled to act against these cybercriminals. Otherwise, the future cybersociety is a dangerous place for retail investors and consumers.