MAY 24, 2021

Facebook’s Russian (Gangster) Money

(https://i0.wp.com/sethhettena.com/wp-content/uploads/2021/05/Usmanov.jpg?ssl=1)
Vladimir Putin meets Alisher Usmanov in 2015. Source: Kremlin.ru

Much has been written about how Russia used Facebook to influence U.S. voters in the 2016
election. Few people realize that Facebook was built with the help of Russian money.

Alisher B. Usmanov, an Uzbek-born mining magnate and one of the world’s richest men, poured
nearly $900 million into Facebook before it went public in 2012. For a time, he was one of the
social media giant’s biggest investors.

CEO and founder Mark Zuckerberg said at the time that Facebook carried out “extensive due
diligence” on this investment. That means the company would have had to have known that that its
biggest outside investor was a man viewed in business, diplomatic, and intelligence circles as a
gangster.

Such information wasn’t hard to come by. In 2007, two years before Usmanov invested in Facebook,
Craig Murray, a controversial former UK ambassador to Uzbekistan, denounced the metals tycoon as
a “vicious thug, criminal, racketeer, heroin trafficker and accused rapist.” Murray made these
charges in a blog post on his website (see copy here)
(https://www.indymedia.org.uk/en/2007/09/380565.html), that was subsequently removed under
legal threat from the UK firm Schillings
(https://www.craigmurray.org.uk/archives/2007/09/usmanov redux/). Similar allegations were made a
( p // g y g / / / / _ /) g

One comment
few days later on the floor of the European Parliament.
(https://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+CRE+20070925+ITEM-
015+DOC+XML+V0//EN&language=EN&query=INTERV&detail=2-428)
NOVEMBER 24, 2021 - 1:56 AM
Pingback: Notes on inequality: Links 11/24/2021 | Phil Ebersole's Blog (https://philebersole.wordpress.com/2021/11/24/notes-on-
Facebook’s crack due diligence team clearly didn’t see Usmanov as a risk. But Megafon, a Russian
inequality-links-11-24-2021/)
mobile phone company in which Usmanov had invested, did. Take a look at this disclosure in
Megafon’s initial public offering in 2012
(https://moscow.megafon.ru/ai/news/138351/attachments/MegaFon_IPO_Prospectus.pdf):

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From Putin’s Kiss to Jeffrey Epstein (https://sethhettena.com/2021/06/21/from-putins-kiss-to-jeffrey-epstein/)

(https://i0.wp.com/sethhettena.com/wp-content/uploads/2021/05/Screen-Shot-2021-05-23-at-
9.57.43-AM.png?ssl=1)
Gafur Rakhimov was sanctioned by the U.S. Treasury in 2012. “Rakhimov is one of the leaders of
Uzbek organized crime with a specialty in the organized production of drugs in the countries of
Central Asia. He has operated major international drug syndicates involving the trafficking of
heroin,” the Treasury Department stated (https://www.treasury.gov/press-center/press-
releases/pages/tg1430.aspx).

Rakhimov, a man Usmanov has known for years, is a heroin kingpin. Sorry, an alleged heroin
kingpin.

Usmanov’s ties to Rakhimov were no secret. The Observer of London reported in 1998 that
Usmanov “admitted that he had known Rakhimov for 20 years, and had met him regularly in
Tashkent and London, but denied that they have a business relationship and that Rakhimov was
involved in drugs.” In 2007, Usmanov gave The Guardian
(https://www.theguardian.com/world/2007/nov/19/russia.football)another explanation of his
Rakhimov ties. “I only knew him since he was a neighbor of my parents,” he said.

Alexander Litvinenko, a former Russian spy who defected and was famously poisoned with
radioactive polonium, did some digging into Gafur Rakhimov. This is from a file made public during
an official UK inquiry into Litvinenko’s death.
(https://i0.wp.com/sethhettena.com/wp-content/uploads/2021/05/Screen-Shot-2021-05-23-at-
8.12.44-AM.png?ssl=1)
Komsomol was a Soviet Communist youth league. (When the Soviet union fell, former Komsomol
bosses like Mikhail Khodorkovsky used their connections to acquire ex-Soviet assets.) The Solntsevo
gang is Moscow’s most powerful organized crime group. (Usmanov has long denied any ties to
organized crime groups.)

Litnvinenko goes on to note that Usmanov has connections with three former KGB officers, one of
whom “saved” Usmanov from a “violent confrontation with Chechnian crime bosses.”

Testimony given in a German criminal case in 2007 identified Usmanov as a representative of the
Solnestsevo Mafia.

Even so, Usmanov shrewdly assessed that, in the West, even a reputed gangster can buy
respectability. “Putin’s Kremlin had accurately calculated that the way to gain acceptance in British
society was through the country’s greatest love, its national sport,” Catherine Belton writes in her
excellent book, Putin’s People. In 2007, Usmanov did just that by acquiring a large stake in London’s
Arsenal football club.

If buying a football club was a ticket into British society, investing in a Silicon Valley unicorn like
Facebook may have been a way for Usmanov to gain respectability in the United States.

Usmanov told Forbes (https://www.forbes.com/forbes/2010/0329/billionaires-2010-europe-usmanov-

internet-media-hard-man-of-russia.html?sh=462445b32623) that he got a call in 2009 from his
associate, Yuri Milner, who asked him whether he had ever heard of Facebook.

“No,” Usmanov replied. “[But] my nephews know it.”

Milner ran Digital Sky Technologies (DST) Global (https://dst-global.com/), an investment firm
backed with Usmanov’s money.

Born in Moscow, Milner attended the Wharton School of Business in the 1990s. After a stint at the
World Bank, he returned to Russia to work at Bank Menatep, which was founded by former
Komsomol boss Mikhail Khodorkovsky. Milner ran Menatep’s investment banking division, Alliance-
Menatep, and rose to the position of deputy chairman.

Menatep rang alarm bells at the CIA in the 1990s because the bank was said to be “one of the main
conduits for the transfer of Communist Party wealth abroad,” Belton wrote in Putin’s People. A
leaked CIA report obtained by The Washington Times in 1994 stated that senior Moscow officials
believed that Menatep was “controlled by one of the most powerful crime clans in Moscow.”

The bank collapsed in 1998 and Milner began investing in Russian Internet companies. Milner
founded Digital Sky Technologies in 2005.

Usmanov acquired a large stake in DST in 2008 and helped finance investments in major Internet
companies in Russia, including VKontakte, Russia’s version of Facebook. “Usmanov is interpreted as
h h l b
a person who, on the Kremlin’s instructions, buys up various Russian [Internet] properties,” a
Russian executive told The Atlantic’s Julia Ioffe.
(https://www.theatlantic.com/international/archive/2017/11/yuri-milner-paradise-papers/545483/)

In 2008, Milner came calling in Silicon Valley looking for a place to invest Usmanov’s money.
Goldman Sachs introduced him to Mark Zuckerberg and a deal was struck.

“We were not asking for board seats and even assigned our voting rights to Mark, which sent a
strong message that we are not seeking any influence over Facebook’s operations,” Milner told
Forbes (https://www.forbes.com/sites/parmyolson/2017/09/28/yuri-milner-russia-dst-facebook-e-
commerce/?sh=7c00d2f67339). “We started to invest in Facebook in 2009 and continued through
2011.”

(https://techcrunch.com/2009/05/26/mark-zuckerberg-and-yuri-milner-talk-about-facebooks-new-
investment-video/)
Milner and Zuckerberg in 2009.

It was an offer than would have been hard for Zuckerberg to refuse. Milner’s offer valued Facebook
at $10 billion, above what other investors were willing to pay at the time. And Milner demanded
little in return, something he has pointed to when reporters started to question Russia’s investment
in Facebook. “If this  had  all been an influence operation,” Milner wrote later
(https://www.vox.com/2017/11/5/16610242/yuri-milner-russia-twitter-facebook-paradise-papers), “we
would surely have sought some control over the companies.”

Milner sold off all of his firm’s Facebook holdings after the IPO. Usmanov also invested his own
money in Facebook, and it remains unclear whether he has completely closed his position. (A 2014
Bloomberg article (https://www.bloomberg.com/news/articles/2014-03-17/billionaire-usmanov-turns-
to-china-after-selling-apple-facebook) noted Usmanov made a “gradual reduction” in his Facebook
holdings.)
 g )

Perhaps Usmanov’s Facebook investment was just a shrewd, well-researched bet. In 2017, however,
new information surfaced that suggested there were other factors at play.

The Paradise Papers, a secret trove of documents leaked from an offshore law firm, revealed that
Kremlin cash was financing Usmanov’s investments.

The money came from Gazprom Investholding (http://www.gazprominvestholding.ru/?locale=en), a

subsidiary of the Russian gas giant, Gazprom, which has been sanctioned by the U.S. Treasury
Department. Usmanov was CEO of Gazprom Investholding from 2000 until 2014.

In his censored blog post, Craig Murray, the former UK ambassador to Uzbekistan, wrote that
Gazprom Investholding was a main conduit to export Russian corruption:

Alisher Usmanov had risen to chair of Gazprom Investholdings because of his close
personal friendship with Putin. He had accessed Putin through Putin’s long time secretary
and now chef de cabinet, Piotr Jastrzebski. Usmanov and Jastrzebski were roommates at
college. Gazprom Investholdings is the group that handles Gazprom’s interests outside
Russia. Usmanov’s role is, in effect, to handle Gazprom’s bribery and sleaze on the
international arena, and the use of gas supply cuts as a threat to uncooperative satellite
states.

Murray claimed in another 2007 blog post

(https://www.craigmurray.org.uk/archives/2007/09/alisher_usmanov/)that “It was Usmanov who
engineered the 2005 diplomatic reversal in which the United States was kicked out of its airbase in
Uzbekistan and Gazprom took over the country’s natural gas assets. Usmanov, as chairman of
Gazprom Investholdings paid a bribe of $88 million to Gulnara Karimova [the daughter of
Uzbekistan’s president] to secure this.”

Russian opposition leader Alexei Navalny also has accused Usmanov of bribing Dmitry Medvedev, a
former Russian president and prime minister with an $83 million mansion. (Usmanov succesfully
sued Navalny for libel.) Navalny’s representatives recently called for the West to sanction Usmanov.

Remember that $880 million Usmanov said he invested in Facebook?

Well, in 2009, Gazprom Investholdings loaned $920 million to Kanton Services Ltd., Usmanov’s
British Virgin Islands-registered firm. A large chunk of that money arrived three months before
Facebook announced its deal with Milner. (Usmanov has denied using state funds to invest in
Facebook.)

Two years later, Kanton took a majority stake in DST USA II. When Facebook went public in 2012,
DST USA II sold 25 million shares of Facebook for more than one billion dollars.
(https://sec.report/Document/0001181431-12-032594/)

Did Usmanov’s influence over Facebook end there?

We can only hope. But consider what happened to VKontakte, Russia’s version of Facebook. In 2014,
Usmanov forced the founder of VKontakte, Pavel Durov, to resign. Durov said he believed he was
forced out because he refused to cooperate with the FSB
(https://www.themoscowtimes.com/2014/04/17/vkontakte-founder-says-sold-shares-due-to-fsb-
pressure-a34132), the successor agency to the KGB. VKontakte is now a tool of Russian government
influence operations, according to the Senate Intelligence Committee.

Interestingly, Volume 5 the Senate Intelligence Committee’s report on Russia noted that VKontakte
reached out to the Trump campaign in 2016, asking whether Trump wanted to put a campaign page
on the site. The ensuing discussion is heavily redacted, although Usmanov’s name lights up a few
footnotes.

Facebook is many times more powerful than VKontakte. Alisher Usmanov should never have been
allowed anywhere near it.