Install

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

. Last Updated: 07/27/2016

Canadian Stock Darling Linked to Russian Mafia




CALGARY, Alberta -- Links to a notorious Russian organized-crime boss have stripped YBM Magnex International, a North American magnet maker and bicycle firm, of the respectability it once enjoyed as a darling of the Canadian stock market.


The twisted tale of international intrigue, spiced with Russian underworld ties, bugged phone calls and machine gun-toting thugs, is worthy of a James Bond thriller. YBM insiders carried out a complex money-laundering operation in Eastern Europe under the noses of stock market regulators in Canada, where the company was listed on the Toronto Stock Exchange.


YBM, which is based in Pennsylvania, is now in receivership ahead of an expected U.S. grand jury indictment and demands for answers from a legion of angry investors.


"What investors now know is what everyone has suspected for the last seven months," said Paul Yetter, a Texas lawyer representing YBM shareholders. "What they now deserve to be told is why the auditors and directors and underwriters that were on the inside of this company failed to disclose the irregularities and many troubling aspects of this business."


Documents filed last week in a Calgary court draw a direct link between YBM and powerful Russian mobster Semyon Mogilevich, capo of a major global syndicate with tentacles in arms dealing, drug smuggling, prostitution and murder.


According to Canadian press reports, British intelligence identified Mogilevich as "one of the world's top criminals."


The link to Mogilevich, previously denied by former YBM executives, was established by forensic accountants probing the company's murky U.S. and Eastern European divisions on behalf of investors.


They allege YBM was a front for an extensive money-laundering operation involving millions of dollars funnelled through Russian, Hungarian, Lithuanian and U.S. bank accounts.


The accountants' report was a bitter pill for fleeced investors, who stand to lose as much as 635 million Canadian dollars ($ 412 million) in stock value.


Although Canadian securities regulators had been informed by British authorities of suspected criminal activity, YBM was granted a listing on the Toronto Stock Exchange in 1996 and eventually earned a place on the prestigious TSE 300 Composite Index.


YBM's market capitalization ballooned to C$1 billion before its Newtown, Pennsylvania, head office was raided May 13 by the U.S. Organized Crime Strike Force after an investigation that included wire taps on phones and fax machines. Trading in its stock was halted.


In their filing last week, shareholder-directors who assumed control of YBM in September said the stock would likely never trade again because of the strong criminal evidence and their belief that a host of Eastern European magnet, oil and wheat trades in 1996 and 1997 were bogus.


In a report dated Dec. 4, accountants Miller, Tate & Co. fingered Mogilevich as a key figure in a Budapest-based firm, Technology Distribution, that acted as a sales agent for YBM's Hungarian unit, United Trade, in a string of suspect magnet sales and trades over the past three years.