Russian investment management companies file lawsuit against Central Securities Depository in Kazakhstan

Two investment management companies from Russia have filed lawsuits against Kazakhstan’s Central Securities Depository (CSD), according to Forbes, citing a website of the Russian legal system.

On January 9, 2024, an arbitrary court in the city of Moscow registered a lawsuit from Digital Assets Management against the CSD and Euroclear, a Belgium-based securities depository, which froze Russian investors’ assets in the spring of 2022. These assets were kept through a corresponding account of the National Settlement Depository (part of MOEX that was hit by the EU sanctions in 2022). Now, the company wants to take back $829,290. It also filed a similar case for $7.5 million in October 2023.

Intellect Capital, another asset management company based in Moscow, filed a lawsuit against the CSD and Euroclear in November 2023. Even though we know that the company wants to take back $4.2 million, the reason for the lawsuits is unclear.

Last year, the CSD instructed brokers to put accounts of their clients from Russia and Belarus on a separate list. The move was necessary to avoid secondary sanctions and was demanded by Euroclear. The depository also refused to exchange Euro bonds nominated in foreign currency for securities nominated in the Russian ruble.

In 2022, the CSD became a popular place for Russian brokers to keep Russian securities including Federal Loan Obligations, the key instrument for Russian public debt. The CSD has also kept Euro bond issues by Russian companies and bought from foreign investors who lost access to these securities because of retaliatory actions by Russian authorities in response to sanctions by Euroclear and Clearstream.

As Forbes noted, the scheme was popular because neither Euroclear nor Clearstream were able to identify the final beneficiary of stocks and bonds in the CSD. The Bank of Russia was also unhappy with this situation as it has no access to this data and can’t control frozen securities of foreign holders, which were introduced to the Russian infrastructure by force last year.

According to the Russian Unified State Register of Legal Entities, Digital Assets Management belongs to Anton Ob’edkov, who used to own a bankrupt elevator producer in Moscow and currently heads Sunrise Medical, a pharmaceutical company, Rusinvest, a farmer business and Germes, a retail company. Intellect Capital was established by Alexander Mikhalev, who owned Spetsstroymontzh, a construction company and Rusprominvest, a car sales company.