Credit Suisse’s Babak Dastmaltschi is the go-to banker for the wealthiest Russians

For Credit Suisse, already struggling to turn the page on scandals that have cost it billions of dollars and incalculable reputational damage, losing a business that rivaled its presence in the Middle East is another hurdle in the way of recovery. To complicate matters for the bank and the rainmaker, they find themselves embroiled in a costly court case involving a rogue banker and dealings tied to wealthy clients – a case that shows no signs of ending soon.

The once lucrative financing of private company or yacht purchases has completely evaporated.

This story is based on interviews with people close to Dastmaltschi and his work at Credit Suisse, who spoke on condition of anonymity to discuss private matters. When contacted by email, Dastmaltschi forwarded the interview requests to Credit Suisse.

“Credit Suisse cannot comment on relationships with potential clients,” the bank said in response to a written request for comment. “He also doesn’t comment on accounts that never existed and accounts that were closed by the bank years ago.”

Credit Suisse is by no means the only bank seeking business from wealthy Russians, but it stands out for the size of its exposure. The lender says about $33 billion of the private wealth it manages belongs to wealthy Russian individuals. That’s 50% more than UBS Group AG, although its Crosstown rival has a much larger overall wealth management business.

Babak Dastmaltschi helped Russian billionaire Alisher Usmanov arrange financing for his $600 million super yacht, the Dilbar. He was seized by the German authorities.Credit:Bloomberg

As business catering to wealthy Russians has taken a hit, some of the office’s roughly 70 staff are now busy helping overstretched compliance teams keep tabs on client assets that are under sanctions. But most have been moved to areas focused on other customers in cities including London and Zurich, while others have been released, according to people familiar with the departures.

For its part, Dastmaltschi has focused entirely on clients in the Middle East and Western Europe, working with investment banking director Christian Meissner to bring deals to the capital markets team of the bank.

Long road to Moscow

Credit Suisse entered Russia shortly after the collapse of the Soviet Union, an early foray that gave it an edge in the chaotic gold rush era that helped a small group of Russians – often called oligarchs – to build vast fortunes. And while other companies also have bankers working with wealthy Russians, Dastmaltschi has established itself as the go-to convenience store for the region’s wealthiest customers.

He has been friends with Usmanov for many years, helping the Uzbek-Russian tycoon fund his vast holdings, which include an Airbus A340 jumbo jet that normally seats more than 300 passengers, a global property portfolio and until recently a major stake in London football club Arsenal. CF.

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Whenever the giant Dilbar docked in Monaco for the annual Yacht Show, Dastmaltschi often spent time on board to hang out with Usmanov and his entourage – while booking a hotel room in the principality to respect company policy, said people familiar with the matter. .

Dastmaltschi’s origins are far from Monaco’s Billionaire’s Bay, or Zurich’s monetary Bahnhofstrasse, home to Credit Suisse and UBS. He grew up in Tehran and studied in the United States, earning a bachelor’s degree in economics from George Washington University. Dastmaltschi began his career at McKinsey in Washington, before spending stints in New York and Germany. He then jumped ship for Morgan Stanley Dean Witter, taking over as head of the US bank’s private wealth management business in Germany.

In 2001, he joined Credit Suisse to lead a newly created global family office, with an entry price of at least 50 million euros in assets. This put him in pole position when Russia’s newly minted elite arrived in Switzerland in the years that followed.

In addition to Usmanov, Dastmaltschi worked with Roman Abramovich, who asked the Credit Suisse banker to help him with an – ultimately unsuccessful – bid for residency at the exclusive Swiss ski resort of Verbier, people familiar with the matter said.

Dastmaltschi also came to the rescue of Viktor Vekselberg to help shore up a portfolio of Swiss industrialists when his main bank in Switzerland, UBS, suffered a state bailout during the 2008 financial crisis, the people said. As a result, the Russian transferred more of his wealth to Credit Suisse.

For Credit Suisse, already struggling to turn the page on scandals that have cost it billions of dollars and incalculable reputational damage, losing a business that rivaled its presence in the Middle East is another hurdle in the way of recovery.

For Credit Suisse, already struggling to turn the page on scandals that have cost it billions of dollars and incalculable reputational damage, losing a business that rivaled its presence in the Middle East is another hurdle in the way of recovery.Credit:Bloomberg

Although he knows German well (he was born to an Austrian mother), as well as English, Dastmaltschi is not fluent in Russian. For some Russian customers this was a plus as the language barrier kept it one step away from the Moscow clique and gossip.

Among his colleagues, Dastmaltschi has earned a reputation as a private banker who can both charm his clients and manage complex financing requests for purchases of large yachts and private jets. His big-ticket items would contribute significantly to the wealth division meeting its revenue and net new asset goals, people with knowledge of the office’s performance said.

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But in 2014, the Russian office ran into serious problems when Russia annexed Crimea, triggering a first wave of sanctions from Europe and the United States. Compliance and know-your-customer rules were already becoming much stricter, and the oligarchs who had grown rich under Presidents Boris Yeltsin and Vladimir Putin were becoming a liability for the bank, even though the government restrictions imposed that year were still relatively limited. scope .

The bank has pulled out of some relationships, including one with Suleyman Kerimov after a public tax dispute in France related to its properties on the French Riviera, people familiar with the matter said.

Then in February, Putin’s invasion of Ukraine and waves of new sanctions crippled the Russian office. Hundreds of millions of customer assets were frozen and bankers rushed to unwind loans to others who could be next on the ever-growing sanctions list.

“In principle, you can’t touch it,” Credit Suisse chief executive Thomas Gottstein said in a phone call to discuss the results last month. “We don’t really have any new business with Russian clients.”

As a result, trading and lending income is expected to drop to almost zero. The once lucrative financing of private company or yacht purchases has completely evaporated.

To complicate matters for the bank, the implosion of Russian business is not the only major looming obstacle involving the banker.

Dastmaltschi’s deep ties to the region have drawn him into an investigation by Geneva prosecutors into whether Credit Suisse should be held criminally liable for a fraud perpetrated by former star banker turned criminal Patrice Lescaudron, who was convicted in 2018 for rigging trades and other transactions. , many of which are linked to Russian customers.

Former Chelsea owner Roman Abramovich was another Dalbatschi client.

Former Chelsea owner Roman Abramovich was another Dalbatschi client.Credit:PA

Credit Suisse said Lescaudron “was not supported by any other Credit Suisse employee in his criminal activities.” Dastmaltschi, who was never named a suspect in the Lescaudron case, helped oversee the Frenchman’s clients. He has been interviewed twice by prosecutors in recent months, to provide information on what he knew of Lescaudron when the latter managed the money of Georgian billionaire Bidzina Ivanishvili.

“Whenever Credit Suisse receives indications of possible misuse of an account for illicit activities, we take appropriate action in accordance with applicable laws and regulations,” the bank said in its statement.

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The principal banker was criticized in a related judgment in Bermuda for failing to disclose the extent of his knowledge of Lescaudron’s early wrongdoings, according to a copy of the March ruling. The Bermuda judge valued Ivanishvili’s losses at the hands of Credit Suisse at more than $550 million and ruled that his life insurance company turned a blind eye to the rogue banker’s behavior. The Bermuda affair prompted Credit Suisse to issue a profit warning in April, exacerbated by a writedown of about $200 million on the bank’s exposure to Russia.

In the Lescaudron case, an indictment of the bank for failing to take all necessary measures to prevent a crime is a real possibility, according to people close to the investigation, which would lead to a trial in Geneva and the prospect of Dastmaltschi being called to testify. Credit Suisse said that neither the criminal proceedings against Lescaudron nor any other investigation “so far reveal any facts that would support the criminal complaints against the bank.”

And what happens to the man who regularly answered the phone when the oligarchs called? Sanction rules prevent Dastmaltschi from doing business with Usmanov and Vekselberg. For the past 10 or so years, Dastmaltschi has been responsible for top clients throughout the EMEA region. As a dealmaker for the world’s wealthiest, he leads an elite team that caters to what Credit Suisse calls “high net worth entrepreneurial clients.”

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The Dilbar, meanwhile, is immobilized in a decidedly unglamorous environment. Covered in a white tarpaulin in a dry dock in Hamburg, the giant ship was seized by German authorities. At this point, it seems unlikely that the vessel will make an appearance at this year’s Monaco Yacht Show in September to welcome Dastmaltschi – or anyone else – on board again.

Bloomberg

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