Jusan vs Kazakhstan: Will The Country Be Able to Return Assets Worth $1.5 Billion?

Last week, the Almaty Prosecutor's Office announced the trial against the Jusan group, which is likely to be the main one for the Ministry of Justice of Kazakhstan in the coming years. Almost immediately, the bank's shareholder filed retaliatory claims in an American court. Orda Financial Analytics Department looked into the prospects of the process and its consequences for Kazakhstan and the bank itself.

The Great Match Has Begun

On February 15, President Qasym-Jomart Toqayev overturned the law on “Elbasy” with his signature, thereby giving a legal start to the decisive dismantling of the “Old" regime. The hunting season for assets illegally obtained at the expense of the people of Kazakhstan has been officially declared open.

The very next day, the Bostandyk court initiated a proceeding on the claim of the Almaty prosecutor, the essence of which is the return of control over the Jusan Group and all its assets back to the former shareholder – Pioneer Capital Invest (PCI). Apparently, the government of Kazakhstan managed to gain control over PCI and a number of funds that support the activities of Nazarbayev University (NU) and Nazarbayev Intellectual Schools (NIS).

The Prosecutor's office demands to cancel the transaction on the transfer of shares of Kazakhstan's First Heartland Securities (among whose subsidiaries are Jusan Bank, Jusan Invest, Jusan Garant, Kyrgyz Optima Bank, a large stake in Kcell and much more) to British Jusan Technologies. In addition, the British company is required to return previously received dividends in the amount of $278 million, 10 million pounds, shares in investment funds, as well as a penalty of 22.9 billion KZT.

Why Is Everything So Difficult?

Until October 2021, the Kazakhstani PCI was the controlling shareholder of the British Jusan Technologies, and then simply presented it to Horizon One, which the next day transferred it to Jysan Holding. Jysan is registered in the USA and owned by the non-profit organization (formerly NU Generation Foundation), also registered in the USA.

The prosecutor's office wants to challenge the withdrawal of assets abroad, but it would be more logical to challenge the donation of Jusan Technologies itself in favour of an American company. And here the Kazakh side would face the first difficulties:

• The British court is not Kazakh, it will not be easy to win there. It will be expensive and long.
• The largest British lobbyist, Lord David Charles Evans, works among the leaders of Jusan Technologies, who would make extensive efforts to create a favourable public opinion around the trials.
• Among the current shareholders of Jusan Technologies is the Arab fund Group 42, owned by Sheikh Tahnoon bin Zayed Al Nahyan, a member of the royal family of the Emirate of Abu Dhabi. The sheikh is not in a runaway gang of former thieving, albeit very wealthy, officials.

Old Kazakhstan Strikes Back

Literally the next day, other news thundered. the American Jysan Holding and the British Jusan Technologies, not agreeing with the demand of the Kazakh prosecutor's office, rolled out a counterclaim, but not in a different jurisdiction: Nevada. The plaintiffs want to challenge the claims of the Government of Kazakhstan regarding assets worth $1.5 billion, which have been diligently and methodically collected for 30 years at the expense of Kazakhstan's citizens and taxpayers.

Representatives of “Old Kazakhstan” won't give up so easily, that's not why they built a complex joint-stock structure and hired the most expensive lobbyists from the UK and the USA.

They made a point in their lawsuit about the obstruction in the payment of dividends ($387 million). The very 172 billion KZT, which, according to Jysan Holding, was illegally frozen by Kazakhstan. And, of course, the authors of the lawsuit did not forget to mention that this whole idea is for the sake of the future of Kazakhstani children – schoolchildren of NIS and NU students.

In addition to the Government of Kazakhstan, the defendants in the lawsuit of Jysan Holding are the Agency for Regulation and Development of the Financial Market (ARDFM), the Anti-Corruption Agency (AntiKor), the Financial Monitoring Agency (FMA), the National Security Committee (KNB) and personally the Chairman of the ARDFM, Madina Abylkasymova, the Deputy Chairman of the ARDFM, Olzhas Kizatov, Arman Omarbekov and, oddly enough, Adilbek Dzhaksybekov, who needs no introduction.

Pyrrhic Bank Refund

The claim of the prosecutor's office in the Bostandyk court of Almaty will undoubtedly be satisfied in higher instances, too, if necessary. And this victory has every chance of being pyrrhic.

According to the court decision, Jusan Bank and other assets of the group located in Kazakhstan can easily come under the control of PCI, they are within the scope of Kazakhstan's jurisdiction. But what to do with the dividends withdrawn abroad? The decisions of a Kazakhstani court on Jusan Technologies and its shareholders will not be enforced beyond the reach of our Themis.

During the proceedings in the Nevada court, Jusan Technologies and Jysan Holding may demand to freeze all foreign assets of Jusan Bank, as well as all companies of the Jusan Group, in order to prevent their withdrawal before the end of the court proceedings. We have already seen this when the funds of the National Fund were frozen at the request of Anatoly Stati. Coincidentally, this year marks the tenth anniversary of Kazakhstan's litigation with the Moldovan businessman.

Such actions on the part of former shareholders can be problematic for Jusan Bank and its customers, as international transactions related to foreign currency, i.e. payments and transfers, including by cards, will be impossible. Jusan will be cut off from the international market in the implementation of such a scenario.

The bank's direct shareholder, the brokerage company First Heartland Securities, has hundreds of millions of dollars worth of foreign bonds in its portfolio. This includes US Treasury securities, access to which may also be frozen. A similar story could occur with the bank's subsidiary, the brokerage company Jusan Invest, which buys foreign securities for its clients.

These events will not “sink” Jusan Bank, but their consequences will seriously affect their activities and hamper development. It will be almost as if the entire group fell under international sanctions. And the activity will be limited to Kazakhstan and, possibly, Russia.

Much like with Stati, for Kazakhstan, disputes in various foreign jurisdictions have every chance to drag on for years or even decades.

The Sacred Lamb of Old Kazakhstan

At first glance, the prospects of Kazakhstan in the battle for the fate of the Jusan group look extremely illusory. However, this is not quite true, there is a way out.

We have described in detail the mechanisms for obtaining state assistance from Jusan Bank through the purchase of Tsesnabank and ATFBank, as well as the story of the sale of the stake in Kcell. Prime Minister, Alikhan Smailov, has claimed that the government had no other solution. It was necessary to choose between two evils, but according to former Deputy of the Parliament of the Republic of Kazakhstan, Kanat Nurov, this is far from the case. The document on the basis of which the decision to help Jusan Bank was made has been classified by the government as "For official use".

The people responsible for decision-making in the Government of the Republic of Kazakhstan, the National Bank and the Ministry of Finance at that historic moment should testify at the trial in Nevada and admit that the assistance was provided with violations. Conditions were created under which the bank and its shareholders received unreasonably more funds from the state, which subsequently allowed them to release provisions and take them into account as profit. In other words: there must be an admission that the state was hit with a financial loss and this is someone's intent.

Such testimony will surely be enough for the American court to come to the conclusion that Jysan Holding and the shareholders behind them should return everything to Kazakhstan; it was not a business, but illicit enrichment at the expense of the people of Kazakhstan.

The consequences of such a confession are political suicide and a direct road not to an American, but to a Kazakhstani prison. But this is not just demonstrative hara-kiri, but rather a sacred sacrifice, which will not only save the remnants of the honour of the repentant but will also help to return to the people of Kazakhstan what rightfully belongs to them. This is exactly the price that those who served, violating the law and morality, must pay to the former regime in order to atone for the "lost" generations of Kazakhstanis.

Original Author: Gulnara Bazhkenova

DISCLAIMER: This is a translated piece, the text has been modified, the content is the same. Please refer to the original article in Russian for accuracy.