Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Swindlers Embezzle A Billion

ST. PETERSBURG - Police are searching for swindlers who stole at least 1 billion rubles in cash and privatization vouchers from 350, 000 small investors in what officials are calling St. Petersburg's "fraud of the century".

In the scam, two private companies, Amaris AO and Revansh Ltd. , are said by the authorities to have attracted investors to the scheme with promises of 250 percent returns in a single month.

Peddled at metro stations, department stores and local factories through trade union organizations, the scheme highlights the dangers awaiting Russia's new investors as they brave a largely unregulated and unpoliced investment market.

According to official figures, about a third of the 1 billion rubles. ($1. 8 million) the scheme brought in was in the form of privatization vouchers. City authorities have notified the victims of the fraud that they would not get new vouchers to replace the vanished ones.

As with many such investment scams, some of the early investors were paid off.

Boris Bogdanov, one of the investors, said Monday that he gave the companies 3, 000 rubles in December and received 10, 000 rubles in mid-January He then invested another 50, 000 rubles.

The companies said they would use the money to purchase Western consumer goods and products from the former Soviet republics and then resell them in Russia.

But investors became nervous after some were not paid off and they could no longer contact the companies.

As the fraud came to light, angry citizens protested in front of the mayor's office last Tuesday and held a bigger demonstration involving thousands of investors Wednesday outside the St. Petersburg City Council in St. Isaak's Square.

Police went to the offices and private apartments of the directors of Amaris and Revansh on Wednesday night, but the directors had vanished and the rooms were emptied of furniture.

Police are still investigating the case but as of Monday, no money or vouchers had been recovered, said Bogdanov, who is active in trying to get investor's money back.

On Thursday, city authorities appealled to local citizens through television, radio and newspapers, calling for calm and patience and promising a full investigation of the case.

Both companies, Amaris and Revansh, were legally registered in the city but were not licensed to take deposits or trade in vouchers, Alexander Petrov, a major general of the Interior Ministry in St. Petersburg, told the newspaper Peterburgskiye Vedomosty.

Petrov said the fraud was partly brought about by the "inexcusable naivety" of St. Petersburg residents. He said investors had failed to ask for ask for proper documents or inquire how the companies would make such a huge profit in only one month.

Petrov said an official investigation had only just begun because the ministry could not act until it received a formal complaint from the victims or an order from local officials.

He said there was some evidence that the directors of the company were not the real culprits and that they were working for professional gangsters who had threatened them.

The St. Petersburg City Council has allocated additional funds to the mayor's office to investigate what it described in an official announcement as the "fraud of the century".

It decided to spend 100 million rubles to buy 50 additional computers, photocopy machines and writing paper to process information from the 350, 000 aggrieved investors.

Pyotr Gorbunov, head of the commercial department within the mayor's office, said that St. Petersburg now has six officially licensed investment funds, and that their addresses are published on front pages of local newspapers.

But he said that at least 10 other private companies without proper licenses are engaged in unauthorized schemes.

"People are blinded with the promises of quick and huge profit and do not listen to our repeated warnings".