Paradise Papers: Leaked Papers tell a story about the Kremlin’s evolving methods of manipulating the internet

A new trove of leaked documents, the so-called Paradise Papers, have revealed that Yuri Milner, a Russian businessman with extensive investments in Silicon Valley, used funds from two Kremlin-controlled—and now U.S.-sanctioned—banks to make large investments in Facebook and Twitter. Both stakes have been sold off, but Milner’s path to Silicon Valley, where he continues be a power player and lives in a $100 million compound, was paved with the Kremlin’s money and a mutually beneficial relationship.Milner’s story illuminates the very beginnings of Moscow’s efforts to establish a foothold in Silicon Valley, back in the days when the American president was pushing a thaw with Russia. It was a moment that set the conditions of the current one, in which the Russians’ use of social media and other digital tools to undermine America’s election has driven U.S.–Russia relations to their lowest point in decades. And it’s revealing of the Kremlin’s evolving methods in learning to control and manipulate the internet to advance its own interests—first at home, and then abroad.Back in 2009, when I was first reporting on Milner in Moscow, his investment fund, called Digital Sky Technologies, was buying up shares in seemingly every company in Russia’s burgeoning tech sector. DST raised eyebrows at the time for several reasons. First, it had a very unusual approach: It invested in competing companies. It bought stakes in VKontakte, the Russian Facebook analog, as well as in Odnoklassniki and MoiMir, two other Russian social-networking sites. “If an industry is in the early stage with no obvious leaders, we want to sponsor all potential leaders,” Grigory Finger, DST’s co-founder, told me at the time. This strategy allowed DST to corner the Russian web market almost completely. By 2010, the company was publicly bragging that 70 percent of Russian page views—and 50 percent of the time spent by Russians online—originated on DST-funded properties. (Milner would not comment on the record for this story.)

Second, DST had been founded in 2005, just three years before the 2008 world financial crisis laid waste to many Russian fortunes. Yet by 2009, Milner and Finger were going on a shopping spree that included some $500 million to buy 5 percent of Facebook as well as a chunk of the American online gaming company Zynga. Where did they get all of that money? Milner and Finger had started DST with their own funds, and the returns on their early investments, though very successful, were just a fraction of those sums, pocket change compared with the money they were throwing around by 2010. (At the time, a banker close to DST, who wished to remain anonymous because he was not authorized to speak on the record, told me that the returns on DST’s other investments “haven’t been sufficient to cover the Facebook and Zynga deals.”)The funds, it turned out, came largely from Alisher Usmanov, an Uzbek-born billionaire who made his fortune in the mines of Central Asia. Usmanov, who owns a stake in the English football club Arsenal, was then-president Dmitri Medvedev’s patron; Usmanov had advised Medvedev when he served as head of Gazprom, and had been one of the first oligarchs to support Medvedev’s succession. A recent exposé by the opposition leader, Alexey Navalny, said that Usmanov bought luxury villas for Medvedev. (Usmanov sued Navalny for defamation in a Moscow court, and won.) Usmanov also had a fearsome reputation. He was known alternatively as “the hard man of Russia” and a “devourer of websites.” His biography includes a jail sentence from the 1980s for fraud and embezzlement, though a Soviet court later overturned the conviction, as well as a lawsuit in the United States, later dismissed, in which DeBeers claimed that Usmanov was part of a scheme that cheated it of $800 million in profits.More importantly for the Kremlin, however, Usmanov had a long track record of buying properties—including paintings, publishing houses, and gas fields—on behalf of Kremlin interests. This time, Usmanov bought a 35-percent stake in DST, and was, by all accounts, Milner’s cash cow. “Usmanov’s stake is completely passive,” the banker told me in 2010.  “He provides all the cash.”

DST made some legitimately lucrative investments for Usmanov. He reportedly made $1 billion on the $200 million he invested in Facebook. The Russian companies that DST invested his money in also did quite well, but that was only half the point. The other half was to give the Kremlin a way to control these new and very influential companies, to make sure there was a receptive person there when the Kremlin called with a demand.

“What is DST? DST is the main government internet company,” said one Russian tech executive, who wished to remain anonymous for fear of government reprisals, when I put this question to him in 2010. He was not the only one. In the tech community, another Russian executive told me at the time, “Usmanov”—and, by extension, DST—“is interpreted as a person who, on the Kremlin’s instructions, buys up various Russian [internet] properties.” Interviews with other prominent players in the booming Russian tech sector—local executives as well as Western investors—revealed that this was the near-unanimous understanding of DST’s role in the Russian tech marketplace; people’s equally unanimous reluctance to go on the record showed the sincerity of their belief. According to these insiders, DST’s links to the Kremlin, though close, were less than transparent. “It’s just not clear who, exactly, they represent and so not everybody wants to have them as an investor,” said one American investor I interviewed in 2010.

But it wasn’t that DST operated purely at the Kremlin’s behest. In 2009, it was rare to find a Russian businessman who would buy an unprofitable business for the Kremlin’s sake—nor would the Kremlin ask him to. (This was before the days when an oligarch would be “asked” to build an Olympic stadium at Sochi or a bridge to Crimea at a massive loss for the sake of the glory of the state.) This was the age of the Kremlin and all its attendant power structures making money wherever and however they could. The web was an objectively attractive investment. At the time, the internet audience in Russia was growing faster than anywhere in Europe, and Russians were spending more hours on social media than any other nationality. “We don’t have a single unprofitable company in our portfolio,” DST partner Verdi Israelian told me then. Facebook and Zynga’s audiences were also growing rapidly, and investing in popular Silicon Valley companies made good business—as well as PR—sense. The Russian elite was integrating its money into Western markets and their children were settling there. Investing in popular Western companies, moreover, put distance between them and the way they earned their money in the often bloody privatization battles of the 1990s.For its part, the Russian government was starting to recognize the strategic value of the internet and wanted to establish some measure of control over such an influential space. Until Medvedev became the titular president, Vladimir Putin was preoccupied with reestablishing Russia’s stature abroad and drowning in revenues from oil and raw materials at home, and he largely ignored vibrant world of the Russian web, particularly its blog-like centerpiece, LiveJournal.

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Sen. Grassley: Firm behind Dossier & Former Russian Intel Officer Joined Lobbying Effort to Kill Pro-Whistleblower Sanctions for Kremlin

Fusion GPS & Russian ex-pat allegedly failed to register as foreign agents while working to dismantle Magnitsky Act
WASHINGTON – Senate Judiciary Committee Chairman Chuck Grassley is asking whether a suspected former Russian intelligence officer-turned U.S. lobbyist and the firm behind the unsubstantiated anti-Trump dossier should have registered as foreign agents for their efforts to bring down a U.S. law on behalf of the Kremlin.  According to a complaint filed with the Justice Department, Fusion GPS, which was also involved in the creation of the unsubstantiated dossier alleging collusion between the Trump campaign and the Russians, was involved in the pro-Russia campaign to kill the Global Magnitsky Act around the same time.
In 2012, President Obama signed into law the Magnitsky Act, named for a lawyer who suspiciously died in Russian custody after accusing Russian government officials and members of organized crime of using corporate identity theft against Hermitage Capital Management to fraudulently obtain and launder $230 million, some of which allegedly ended up in U.S. real estate projects. The Magnitsky Act imposed sanctions against those involved as well as other Russians designated as human rights abusers.
In 2013, the Justice Department opened a case to seize the U.S. assets of Russian-owned Prevezon Holdings, which received millions of dollars from the theft and used it to purchase real estate in New York, according to the department’s complaint. In response, Prevezon Holdings and the Kremlin launched a campaign to undermine the Magnitsky Act and discredit Magnitsky’s claims of corruption, according to a 2016 complaint by Hermitage CEO William Browder.  Fusion GPS and Rinat Akhmetshin, among others, were involved in the pro-Russia campaign in 2016, which involved lobbying congressional staffers to attempt to undermine the Justice Department’s account of Magnitsky’s death and the crime he uncovered, repeal the Magnitsky Act itself, and delay efforts to expand it to countries beyond Russia, according to Browder’s complaint.  Akhmetshin, a Russian immigrant, has reportedly admitted to being a “soviet counterintelligence officer,” and has a long history of lobbying the U.S. government for pro-Russia matters.  Fusion GPS was reportedly tasked with generating negative press coverage of Browder and Hermitage.
Despite the reported evidence of their work on behalf of Russian interests, neither Fusion GPS nor Akhmetshin are registered as foreign agents under the Foreign Agent Registration Act (FARA).
FARA was passed to improve transparency of individuals and organizations that lobby the U.S. government or act as publicity agents on behalf of a foreign principal.  Grassley has previously raised concerns about the department’s inconsistent enforcement of FARA. This case is particularly important given that Fusion GPS was apparently simultaneously working on the unsubstantiated dossier alleging collusion between Trump presidential campaign associates and Russia, which the FBI reportedly agreed to continue funding.  Because Fusion GPS had not registered under FARA, it is unclear whether the FBI was aware of the company’s pro-Russia activities and its connection with Ahkmetshin when evaluating the credibility of the dossier the company helped create.
In a letter today to the Justice Department, Grassley is asking for an update on Browder’s 2016 FARA complaint, including what steps the department has taken to enforce FARA.
Full text of Grassley’s letter follows:
March 31, 2017
VIA ELECTRONIC TRANSMISSION
The Honorable Dana Boente
Acting Deputy Attorney General
U.S. Department of Justice
950 Pennsylvania Avenue, N.W.
Washington, DC 20530
Dear Mr. Boente:
Over the past few years, the Committee has repeatedly contacted the Department of Justice to raise concerns about the Department’s lack of enforcement of the Foreign Agents Registration Act (“FARA”).  I write regarding the Department’s response to the alleged failure of pro-Russia lobbyists to register under FARA.  In July of 2016, Mr. William Browder filed a formal FARA complaint with the Justice Department regarding Fusion GPS, Rinat Akhmetshin, and their associates.[1]  His complaint alleged that lobbyists working for Russian interests in a campaign to oppose the pending Global Magnitsky Act failed to register under FARA and the Lobbying Disclosure Act of 1995.  The Committee needs to understand what actions the Justice Department has taken in response to the information in Mr. Browder’s complaint.  The issue is of particular concern to the Committee given that when Fusion GPS reportedly was acting as an unregistered agent of Russian interests, it appears to have been simultaneously overseeing the creation of the unsubstantiated dossier of allegations of a conspiracy between the Trump campaign and the Russians.
Mr. Browder is the CEO of Hermitage Capital Management (“Hermitage”), an investment firm that at one time was the largest foreign portfolio investor in Russia.  According to the Justice Department, in 2007, Russian government officials and members of organized crime engaged in corporate identity theft, stealing the corporate identities of three Hermitage companies and using them to fraudulently obtain $230 million.[2]  The $230 million was then extensively laundered into accounts outside of Russia.  When Hermitage learned of the situation, its attorneys, including Mr. Sergei Magnitsky, investigated.  In December of 2007, Hermitage filed criminal complaints with law enforcement agencies in Russia, complaints which identified the Russian government officials who had been involved.  In response, the Russian government assigned the case to the very officials involved in the crime, who then arrested Mr. Magnitsky and kept him in pretrial detention for nearly a year, until he died under highly suspicious circumstances after being beaten by guards and denied medical treatment.
In response to this brazen violation of human rights, Congress passed the bipartisan Sergei Magnitsky Rule of Law Accountability Act of 2012 (“Magnitsky Act”), which was signed into law by President Obama.  The law authorized sanctions against those who the President determined were responsible for Mr. Magnitsky’s detention and death, those who financially benefitted from it, and those involved in the criminal conspiracy he had uncovered.  The law also authorized sanctions against those the President determined were responsible for other extrajudicial killings, torture, or human rights violations committed against individuals seeking to promote human rights or expose illegal activity carried out by Russian government officials.  The sanctions involved banning the identified individuals from the U.S. and authorizing the President to use the International Emergency Economic Powers Act to freeze their property, provided that the property is in the United States.  President Obama initially identified 18 such individuals, and subsequently added others.
The Russian government responded to the Magnitsky Act by prohibiting all adoptions of Russian children by United States citizens.  It similarly put out a list of 18 U.S. government officials banned from Russia.
In 2013, the Department of Justice initiated a civil asset forfeiture case against Prevezon Holdings, a company owned by Russian Denis Katsyv, the son of a former Russian government minister.[3]  The Justice Department argued that his company had received millions of the laundered $230 million from the conspiracy Mr. Magnitsky discovered, and had used it to purchase real estate in New York.[4]  Additionally, in 2015, Senators Cardin and McCain introduced the Global Magnitsky Act, which would extend the Magnitsky sanctions framework to human rights violators across the globe.
As detailed in press accounts and in Mr. Browder’s FARA complaint, in response to these actions, Prevezon Holdings and the Russian government began a lobbying campaign purportedly designed to try to: repeal the Magnitsky Act; remove the name “Magnitsky” from the Global Magnitsky Act and delay its progress; and cast doubt on the Justice Department’s version of events regarding the corporate identity theft of Hermitage’s companies, the fraudulently obtained $230 million, and the death of Mr. Magnitsky.[5]
Prevezon’s lobbying efforts were reportedly commissioned by Mr. Katsyv, who organized them through a Delaware non-profit he formed and through the law firm then representing Prevezon in the asset forfeiture case, Baker Hostetler.[6]  Among others, the efforts involved lobbyist Rinat Akhmetshin and Fusion GPS, a political research firm led by Glenn Simpson.[7]  According to press reports, Baker Hostetler partner Mark Cymrot briefed congressional staff on the asset forfeiture case, attempting to discredit the Justice Department’s version of events and instead push the Russian government’s account.[8]  Rinat Akhmetshin, along with former Congressman Ron Dellums, reportedly lobbied the House Foreign Affairs Committee, telling staffers “they were lobbying on behalf of a Russian company called Prevezon and ask[ing] [the Committee] to delay the Global Magnitsky Act or at least remove Magnitsky from the name,” as well as telling the staffers “it was a shame that this bill has made it so Russian orphans cannot be adopted by Americans.”[9]  Mr. Akhmetshin was also involved in the screening, targeting Congressional staffers and State Department officials, of an anti-Magnitsky propaganda film.[10]  For its part, Fusion GPS reportedly “dug up dirt” on Mr. Browder’s property and finances, and attempted to generate negative stories about Mr. Browder and Hermitage in the media, shopping stories to a number of reporters.[11]
According to press reports, the Russian government also directly delivered a letter on the issue to a Congressional delegation visiting the country, which similarly sought to undermine the Justice Department’s account of events by accusing Mr. Browder and Mr. Magnitsky of a variety of crimes.[12]  The letter from the Russian government also stated:
Changing attitudes to the Magnitsky story in Congress, obtaining reliable knowledge about real events and personal motives of those behind the lobbying of this destructive Act, taking into account the pre-election political situation may change the current climate in interstate relations.  Such a situation could have a very favorable response from the Russian side on many key controversial issues and disagreements with the United States, including matters concerning the adoption procedures.[13]
It is particularly disturbing that Mr. Akhmetshin and Fusion GPS were working together on this pro-Russia lobbying effort in 2016 in light of Mr. Akhmetshin’s history and reputation.  Mr. Akhmetshin is a Russian immigrant to the U.S. who has admitted having been a “Soviet counterintelligence officer.”[14]  In fact, it has been reported that he worked for the GRU and allegedly specializes in “active measures campaigns,” i.e., subversive political influence operations often involving disinformation and propaganda.[15]  According to press accounts, Mr. Akhmetshin “is known in foreign policy circles as a key pro-Russian operator,”[16] and Radio Free Europe described him as a “Russian ‘gun-for-hire’ [who] lurks in the shadows of Washington’s lobbying world.”[17]  He was even accused in a lawsuit of organizing a scheme to hack the computers of one his client’s adversaries.[18]
As you know, Fusion GPS is the company behind the creation of the unsubstantiated dossier alleging a conspiracy between President Trump and Russia.  It is highly troubling that Fusion GPS appears to have been working with someone with ties to Russian intelligence –let alone someone alleged to have conducted political disinformation campaigns– as part of a pro-Russia lobbying effort while also simultaneously overseeing the creation of the Trump/Russia dossier.  The relationship casts further doubt on an already highly dubious dossier.
The actions of Mr. Akhmetshin, Fusion GPS, and the others described in Mr. Browder’s complaint appear to show that they acted on behalf of a foreign principal.  This is exactly the type of activity Congress intended to reach with FARA.  When properly enforced, FARA provides important transparency.  However, in this case, because none of the parties involved in the anti-Magnitsky lobbying had properly registered under FARA, these suspicious connections were not appropriately documented and brought to public light.  In fact, it is unclear whether the FBI was or is aware of Fusion GPS’s pro-Russia lobbying and connection to Mr. Akhmetshin, or that these efforts coincided with the creation of the dossier.  Presumably, such awareness would have informed the FBI’s evaluation of the dossier’s credibility.  This is why it is important for the Department of Justice to actually enforce FARA’s disclosure requirements.
In order for the Committee to evaluate the situation, please respond to the following by no later than April 14, 2017:
  1. What actions, if any, has the Department of Justice taken to enforce FARA’s requirements regarding the parties identified in Mr. Browder’s July 16, 2016 complaint?
  2. None of the parties involved appear to have registered these activities pursuant to FARA.  Why has the Justice Department not required them to register under FARA?
  3. Has the Justice Department sent letters of inquiry to any of the parties identified in the complaint?
  4. If so, please provide copies.  If not, why not?
  5. Under 28 C.F.R. § 5.2, any present or prospective agent of a foreign entity may request an advisory opinion from the Justice Department regarding the need to register.  Have any of the parties identified in the complaint ever requested an advisory opinion in relation to the pro-Russia work described in this letter?  If so, please provide a copy of the request and the opinion.
I anticipate that your written response and the responsive documents will be unclassified.  Please send all unclassified material directly to the Committee.  In keeping with the requirements of Executive Order 13526, if any of the responsive documents do contain classified information, please segregate all unclassified material within the classified documents, provide all unclassified information directly to the Committee, and provide a classified addendum to the Office of Senate Security.  The Committee complies with all laws and regulations governing the handling of classified information.  The Committee is not bound, absent its prior agreement, by any handling restrictions or instructions on unclassified information unilaterally asserted by the Executive Branch.
Thank you for your prompt attention to this important matter.  If you have any questions, please contact Patrick Davis of my Committee staff at (202) 224-5225.
Sincerely,
Charles E. Grassley
Chairman
Committee on the Judiciary
cc:
The Honorable Dianne Feinstein
Ranking Member
Senate Committee on the Judiciary
The Honorable James Comey
Director
Federal Bureau of Investigation
The Honorable Ben Cardin
United States Senate
The Honorable John McCain
United States Senate
House Committee on Foreign Affairs

  1. [1] Complaint Regarding the Violation of US Lobbying Laws by the Human Rights Accountability Global Initiative Foundation and Others, Hermitage Capital Management (July 15, 2016) (“Browder Complaint”) (attached).
  2. Second Amended Verified Complaint, U.S. v. Prevezon Holdings Ltd., et al., No. 13-cv-6326, ECF 381 (SDNY) (“DOJ Complaint”) (attached).
  3. U.S. v. Prevezon Holdings Ltd., et al., No. 13-cv-6326 (SDNY).
  4. DOJ Complaint, supra note 2.
  5. Browder Complaint, supra note 1; see Isaac Arnsdorf, FARA Complaint Alleges Pro-Russian Lobbying, Politico (Dec. 8, 2016); Michael Weiss, Putin’s Dirty Game in the U.S. Congress, The Daily Beast (May 18, 2016); Mike Eckel, Russian ‘Gun-For-Hire’ Lurks in Shadows of Washington’s Lobbying World, Radio Free Europe/Radio Liberty (July 17, 2016); Isaac Arnsdorf, From Russia, With Love?, Politico (Aug. 17, 2016); Chuck Ross, Oppo Researcher Behind Trump Dossier Is Linked to Pro-Kremlin Lobbying Effort, The Daily Caller (Jan. 13, 2017); Isaac Arnsdorf and Benjamin Oreskes, Putin’s Favorite Congressman, Politico (Nov. 23, 2016).
  6. Browder Complaint, supra note 2; Isaac Arnsdorf, FARA Complaint Alleges Pro-Russian Lobbying, Politico (Dec. 8, 2016).
  7. Id.; Chuck Ross, Oppo Researcher Behind Trump Dossier Is Linked to Pro-Kremlin Lobbying Effort, The Daily Caller (Jan. 13, 2017).
  8. Isaac Arnsdorf, FARA Complaint Alleges Pro-Russian Lobbying, Politico (Dec. 8, 2016).
  9. Michael Weiss, Putin’s Dirty Game in the U.S. Congress, The Daily Beast (May 18, 2016); see Isaac Arnsdorf, From Russia, With Love?, Politico (Aug. 17, 2016).
  10. Mike Eckel, Russian ‘Gun-For-Hire’ Lurks in Shadows of Washington’s Lobbying World, Radio Free Europe/ Radio Liberty (July 17, 2016).
  11. Isaac Arnsdorf, FARA Complaint Alleges Pro-Russian Lobbying, Politico (Dec. 8, 2016); Chuck Ross, Oppo Researcher Behind Trump Dossier Is Linked to Pro-Kremlin Lobbying Effort, The Daily Caller (Jan. 13, 2017).
  12. Michael Weiss, Putin’s Dirty Game in the U.S. Congress, The Daily Beast (May 18, 2016).
  13. Id.
  14. Isaac Arnsdorf, FARA Complaint Alleges Pro-Russian Lobbying, Politico (Dec. 8, 2016).
  15. Id. (“Akhmetshin used to spy for the Soviets and ‘specializes in active measures campaigns’ … Akhmetshin acknowledged having been a Soviet counterintelligence officer”); Chuck Ross, Oppo Researcher Behind Trump Dossier Is Linked to Pro-Kremlin Lobbying Effort, The Daily Caller (Jan. 13, 2017) (Akhmetshin “was affiliated with GRU, Russia’s main intelligence directorate”); Steve LeVine, The Oil and the Glory: The Pursuit of Empire and Fortune on the Caspian Sea 366 (2007) (describing how a former KGB officer turned businessman turned Kazahk politician “hired a lobbyist, and English-speaking former Soviet Army counter-intelligence officer named Rinat Akhmetshin [and] the skilled Akhmetshin burrowed in with Washington reporters, think tank experts, administration bureaucrats, and key political figures”); Plaintiff’s Complaint, International Mineral Resources B.V. v. Rinat Akhmetshin, et al., No. 161682/2015, 2015 WL 7180277 (N.Y. Sup.) (“Akhmetshin is a former Soviet military counterintelligence officer who moved to Washington, D.C. to become a lobbyist.”).
  16. Isaac Arnsdorf, From Russia, With Love?, Politico (Aug. 17, 2016).
  17. Mike Eckel, Russian ‘Gun-For-Hire’ Lurks in Shadows of Washington’s Lobbying World, RADIO FREE EUROPE/RADIO LIBERTY (July 17, 2016).
  18. Id.; Plaintiff’s Complaint, International Mineral Resources B.V. v. Rinat Akhmetshin, et al., No. 161682/2015, 2015 WL 7180277 (N.Y. Sup. Ct.).

Spy Found Dead in a Bag ‘Had Infuriated his MI6 Bosses by Illegally Hacking into Secret US Data on Bill Clinton’

The British spy whose body was found padlocked inside a bag in his flat had illegally hacked into secret data on former U.S. president Bill Clinton, it has been revealed. Gareth Williams, 31, was discovered in a holdall in the bath at his London home. He had dug out a guest list for an event […]

Sen. Jesse Helms: “This campaign against the American people – against traditional American culture and values – is systematic psychological warfare.”

Excerpts from a speech before the Senate by Senator Jesse Helms on December 15, 1987: “This campaign against the American people – against traditional American culture and values – is systematic psychological warfare.  It is orchestrated by a vast array of interest comprising not only the Eastern establishment but also the radical left.  Among this […]