Kremlin-Linked Icelandic Fund Poured Money in Trump Businesses

Trump Tower

The Panama Papers revealed that, in 2013, the Icelandic fund FL Group tried to avoid paying $250 million in taxes for a multi-billion-dollar investment in real estate projects, many of which belonged to the Trump family.

The FL Group and Russian Investors

The bank started in 2005 as a holding company but soon morphed into a self-standing financial institution preferred mostly by Russian clients. Years later, it became Iceland’s largest equity fund.

An investigative report found that the FL Group was an Icelandic bank with an impressive portfolio of Kremlin-linked billionaire clients that mushroomed after the collapse of the Soviet system. The Russian oligarchs invested so much in Iceland that President Vladimir Putin promised to bail out Icelandic banks for $5.4 billion.

FL Group, which was described as being “closer to Putin” than other Icelandic financial institutions, bought a series of Bayrock properties for $50 million. The properties included Trump Merrimac in Florida, The Trump Tower in Phoenix, AZ, and Trump SoHo.

The Icelandic bank wanted to avoid taxes on dividends by structuring the deal as a loan. That way, dividends would have been tax-free as they had been rebranded as a “contingent interest.” The entire operation was obviously illegal, and Donald Trump likely had to agree to it first.

The Scheme Was Illegal

The lawsuit alleges that FL Group and Bayrock knew in advance that the scheme was illegal. What’s more, the two firms worked together to hide the investment from Bayrock’s other clients and pledged to collaborate on $2 billion worth of real estate projects.

The plaintiffs and other minor investors were kept in the dark about the deal and stripped of millions of dollars in profits. Iceland’s richest man Björgólfur Thor Björgólfsson confirmed FL had been silently taken over by Russian businessmen, which reduced his stake in the company to 30%. The Russian oligarchs used the fund to “channel” Russian money through it.

The $2 billion investment never went through because of the financial crisis which exposed banks, including FL, to scrutiny by regulators. The FL Group had to file for bankruptcy.
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