A Broker Popular with Russian Investors Is Accused of Dodging Sanctions

On Aug. 15, activist short sellers from Hindenburg Research accused Freedom Holdings, a broker popular with Russian investors, of falsifying reports and circumventing sanctions. Hindenburg’s sources said that Freedom’s clients brought suitcases stuffed with cash, and its employees broke the law to launder millions of dollars of dirty money. The broker denies these claims.

Freedom Finance is regarded as one of the biggest brokers with Russian clients — data from January 2022 suggests it had more than 137,000 clients. Since the start of the war, it has been harder for Russian investors to acquire foreign assets: foreign brokers started blocking Russians from opening accounts, while the Central Bank imposed a ban on investing in securities issued by “unfriendly” countries. Freedom, which subsequently moved to Kazakhstan, offered Russians a way to open accounts outside of the country, giving them an opportunity to invest in Western markets.

Freedom’s alleged sanctions violations were described to Hindenburg by former employees of the broker. One of them claimed that he personally saw a suitcase stuffed with $2.5 million in cash. Staff at Freedom allegedly failed to carry out any checks on the sources of these funds. “Basically, they were cowboys,” one source said. “They found a way to get money from oligarchs, send it all around the world and invest it in stock markets.”

In addition, Freedom was accused of advertising its ability to withdraw assets from sanctioned banks. This claim is easier to prove than accusations which rely on statements from sources because “there was a public marketing campaign,” Roman Rasimas, a lawyer for sanctions experts Zorge Partners, told The Bell.

Freedom’s founder, Timur Turlov, denied all the allegations. He also said that at least one of Hindenburg’s sources might hold a grudge after being fired on grounds of “insufficient knowledge” shortly after being hired.

Why the world should care

Experts interviewed by The Bell believe that the results of an investigation into these claims could result in a tightening of compliance rules for Russians and Russian companies, whose money is already widely regarded as toxic due to the war.