Nikolay Levitskiy: Dark dealings on the Hong Kong Stock Exchange

Renowned for orchestrating company bankruptcies, Nikolay Levitskiy, a Russian businessman, has emerged as an active nominee asset holder for oligarchs facing international sanctions. His past roles include being a co-founder of “Geotech” Oil Service Holding and serving as the Director General of “EuroChem,” owned by oligarch Andrey Melnichenko.

Who Is Nikolay Levitskiy ?

Mr Levitskiy was born in St Petersburg. In 1994, after graduating from the University of Economics and Finance, he immediately became chairman of the board of the largest regional branch of KomiBank, which held the assets of oil companies (and which was declared bankrupt two years later). Then he moved to the Komi TEK oil company, and then to the Imperial Bank. After that, he moved to the post of Vice President for Economics and Finance at Slavneft. Then he headed oligarch Andrey Melnichenko’s holding Eurochem, and in 2003 he was appointed the Vice Governor of the Komi Republic.

By manipulating the market with shares listed on the Stock Exchange of Hong Kong Limited, Levitskiy is accumulating shares in projects linked to large capital.

Nikolay Levitskiy manipulates shares on the Hong Kong Stock Exchange, accumulating interests in capital-intensive projects. The surge in sanctions against Russian billionaires, labeled as members of Putin’s inner circle post the Ukraine invasion, has prompted them to safeguard their assets. Over the past two years, a systematic process has evolved, involving the transfer of assets to lesser-known businessmen on paper.

The narrative of Nikolay Levitskiy, revealed as a nominal holder of Melnichenko’s sanctioned assets in 2022, exemplifies this process. Levitskiy’s fraudulent activities largely remain concealed from Western regulatory agencies.

Many Russian billionaires were added to the lists of sanctioned nations by the EU, US, UK, and other Western nations that were defined as “members of Vladimir Putin’s inner circle” after Russia invaded Ukraine on a large scale.

Between 2022 and 2023, Levitskiy unexpectedly benefited from Melnichenko’s “former” assets despite facing setbacks such as his controversial departure from IGSS (“Geotech”) and the bankruptcy of the Novgorod-based “Deka” Kvass Factory.

The intricate Levitskiy-Melnichenko scheme involves individuals like Marina Kolesnikova, Levitskiy’s nominee, and Olga Chesnokova, his financial advisor. The takeover of Kimkano-Sutarsky GOK illustrates this complex scheme.

Nikolay Levitskiy purchased IRC shares through Axiomi Consolidation Ltd., and in a surprising turn, Gazprombank assigned its loan rights to “MIK INVEST” in a seemingly orchestrated move. Levitskiy’s puppet Board of Directors at IRC, formed in July 2022, facilitated the acquisition and consolidation of IRC shares.

Levitskiy’s control over the Board allowed him to issue additional shares to MIK INVEST in exchange for $19 million. Melnichenko supplied funds for this transaction. Levitskiy’s subsequent reshuffling of his share package, diluting it and avoiding regulator attention, further solidified his control.

Despite the apparent interconnectedness of Levitskiy’s companies and their shared funding sources, international regulators have shown limited interest. Levitskiy’s maneuvering, backed by Melnichenko’s funds, highlights the potential dilution of genuine IRC shareholders’ interests.

This intricate web of financial schemes orchestrated by Nikolay Levitskiy sheds light on the vulnerability of the regulatory landscape, allowing individuals to exploit loopholes and manipulate markets for personal gain. Until regulatory scrutiny intensifies, Levitskiy and Melnichenko may continue to expand their scheme, posing a potential threat to the interests of other shareholders.

A methodical process has been developed over the past two years for the ostensibly routine transfer of assets to lesser-known Russian businessmen who pretend to be new owners on paper.

The story of Nikolay Levitskiy, who in 2022 came to be known as a nominal holder of Melnichenko’s assets subject to international sanctions (the mining companies, the Far Eastern Vanino Port, and the Primorskaya Water Power Plant), as well as the assets of Gennady Timchenko and his son-in-law Gleb Frank (“Tuloma” Sea Terminal), the former Energy Minister Sergey Generalov (AO “NPF MIKRAN”), and Boris Aleshin (OOO “IK Axioma”) are representative cases in point.

Furthermore, the vast majority of his fraudulent activity is still hidden from Western regulatory agencies.

Between 2022 and 2023, Nikolay Levitskiy benefited from Andrey Melnichenko’s “former” assets. This would be an entirely unexpected turn of events for any business analyst.

Because the acquisition of the assets came following several business setbacks, including the controversial departure from IGSS (“Geotech”), the financial fraud that caused the company’s debt to balloon to $700 million, and the bankruptcy of its final asset, the Novgorod-based “Deka” Kvass Factory.

But in April 2022, Nikolay Levitskiy unexpectedly acquired Donalink Ltd., Melnichenko’s company that held a majority stake in Primorskaya Water Power Plant.

The purchase of control over IRC company, the owner of Kimkano-Sutarsky GOK (Ore-dressing and processing enterprise) in the Jewish Autonomous Region—the largest producer of iron ore in the Russian Far East—through a series of transactions in 2021–2023 was even more astounding.

As China is GOK’s main market and IRC shares are traded on the Stock Exchange of Hong Kong Limited, such an asset would fetch a high price even in the difficult economic times in the Russian Federation.

We have deciphered the inner workings of the Levitskiy-Melnichenko scheme, which involves multiple individuals, including Marina Kolesnikova, who is both Levitskiy’s nominee and the owner of OOO “MIK INVEST,” one of the major shareholders of IRC, and Olga Chesnokova, using the takeover of Kimkano-Sutarsky GOK as an illustrative example.

In addition to serving as Levitskiy’s financial advisor and a director on the board of his “Geotech Holding,” she represents him as a nominee at Oikku Finance, an IRC shareholder that actively participates in Levitskiy’s financial schemes.

How Kimkano-Sutarsky GOK was taken over

December 2021 saw Levitskiy purchase 29.86% of IRC shares through his offshore company, Axiomi Consolidation Ltd. At the time, the shares were encumbered in Gazprombank’s favor with a $113 million credit extended to Kimkano-Sutarsky GOK (henceforth referred to as KS GOK).

In February 2022, a mere two months afterward, Gazprombank “unexpectedly” assigned its loan rights to OOO “MIK INVEST,” which is registered under the nominee Marina Kolesnikova’s name.

In July 2022, Denis Cherednichenko, Dmitry Dobryak, Vitaly Sheremet, Alexey Romanenko, and Natalia Ozhegina, who had previously worked for Levitskiy in his other businesses, formed Levitskiy’s puppet Board of Directors at IRC to gain complete operational control over the company. Denis Vitalyevich Cherednichenko, a former Levitskiy subordinate and member of the Geotech Holding board of directors as well as vice president, was named executive director.

Now that he had control over the Board of Directors, Nikolay Levitskiy was able to carry out the plan to acquire and combine the IRC share package. He has accomplished this with money from the primary, revenue-generating KS GOK enterprise.

In October 2022, IRC issued an additional 16.7% of shares to further cement his total control over the asset. It has been mentioned that there was no charge for this.

In order to repay the same credit, new shares were agreed upon to be sold to MIK INVEST for $19 million. Andrey Melnichenko supplied the “run through” funds needed to buy MIK INVEST shares.

The money came to IRC, and the next day, following GOK’s credit repayment in MIK INVEST’s favor, it was returned to Melnichenko. As a result of this arrangement, MIK INVEST acquired a 16.7% stake in IRC and became a new shareholder.

In July 2023, Levitskiy reregistered his package, which was “diluted” by an additional issue and was already free of the pledge. The package consisted of 24.88% shares from Axiomi Consolidation Ltd. to his other offshore company, Axioma Capital FZE, which is based in the United Arab Emirates, and an additional 1.01% from Ineth Limited. This was done to avoid drawing attention from regulators.

Additionally, in November 2023, Levitskiy purchased 4.72% of his own Oikku Finance shares, which were reportedly held by Olga Chesnokova, his nominee and former subordinate. The trade was for 47 million Hong Kong dollars ($6 million).

Recall that in 2022, Oikku Finance paid $6 million for its share package (4.72%) that it had previously acquired through a series of transactions, first from Kimkano-Sutarsky GOK for MIK INVEST and then for Oikku Finance, once more with the approval of the Board of Directors, which is entirely under Levitskiy’s control.

Consequently, by November 2023, MIK INVEST owned 16.67% of IRC, while Levitskiy had amassed 30.61% of the company.

Subsequently, other shareholders have been offered the opportunity to redeem their shares at the same price of 0.118 HKD per share by Levitskiy’s company Axioma Capital FZE. This implies that the total value of the IRC is now 1 billion HKD ($129 million).

Widely closed eyes of the regulators

Since Levitskiy’s structures have complete control over Kimkano-Sutarsky GOK, the enterprise was effectively moved out of the sanctions zone in less than two years and at a minimal cost.

To pay off debts, the company must give all of its earnings to MIK INVEST, its shareholder. Without the assistance of authorities, such an arrangement could not have been put into place.

Thus, Rostislav Goldshtein, the current Governor of the Jewish Autonomous Region and an old friend of Levitskiy’s gets drawn into the plot.

The businessman and the Head of the Region have a “warm relationship” that dates back to 2003 when Goldshtein was the Chairman of the State Council of the Komi Republic and Levitskiy was the Vice-Governor of the Komi Republic.

In addition to providing implicit approval for the plan’s implementation, the governor’s “friendly” demeanor allowed GOK, which pays 10% of the Jewish Autonomous Region’s taxes, to receive additional tax breaks.

Such schemes are not unprecedented in modern Russia, but, surprisingly, international regulators are uninterested in them.

Despite the apparent shared source of funding from KS GOK and their close interconnection through mutual financing chains, Axioma Capital FZE, Oikku Finance, and MIK INVEST, the three companies involved in recent transactions, do not disclose their affiliations with the Hong Kong Stock Exchange.

Additionally, in 2021–2022, Mrs. Chesnokova continuously received funding from OOO “MIK” via Levitskiy’s companies via her own companies. The same Levitskiy nominee who owns MIK INVEST M.A. Kolesnikova also owns OOO “MIK.”

To avoid the sanctions, Mr. Levitskiy personally obtained funding for himself and his OOO “IK “AXIOMA” in 2022 through KS GOK and MIK INVEST. To this entity, assets, including those of Melnichenko, were transferred.

Therefore, a 47% shareholding in IRC was concentrated in the hands of a single nominal shareholder thanks to the unjust redemption of shares by Levitskiy and his affiliated companies at a price that was substantially less than the actual market price.

With the financial support of the sanctioned oligarch Melnichenko, IRC, the issuer, was able to extract funds from KS GOK to finance the acquisition of shares.

Given the foregoing, it is clear that Levitskiy’s market manipulations, as the main benefactor of the IRC share scheme, are solely intended to further and protect the interests of his internationally sanctioned “boss,” Andrey Melnichenko.

Regulation authorities should have long since begun looking into the fact that genuine IRC shareholders were duped for these reasons.There is a great chance that Levitskiy and Melnichenko will continue to dilute the interests of other shareholders in the scheme and expand it until this scrutiny takes place.