Comment by 0x12 | Hacker News Reader

Comment by 0x12 | Hacker News Reader

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Criminals routinely invest lots of money in losing enterprises. This is called money laundering. They'll take a hit from 30 to 70% or even worse just to be able to get their money back in a way that they can spend it legitimately. They may not even care to win overall, as long as some of the bets pay off that's great. It will give influence and legitimacy.

The hard part is always to find places that will take large amounts of money, no questions asked and that have a gambling element in it which could explain large returns in a plausible way, and in a way that will stay.

That's why casinos are very popular, ditto with antique dealerships, the real estate sector and financial services such as banking.

It's really not that much of a stretch of the imagination to use venture capital as another money laundering setup, essentially it has all the elements of a casino, large amounts of money go in, lots of it disappears and some relatively small bets pay off huge.

Another reason for making 'silly bets' is to diversify whatever the cost, because being the owner of former state enterprises and a bunch of mines always has a risk of nationalization, silicon valley investments have returns in hard currency and on top of that are unlikely to ever be taken away at the whim of some ruler.

http://en.wikipedia.org/wiki/Alisher_Usmanov has an interesting profile and if that's Milners main source of capital there are definitely some pointed questions that should be asked. This is not who you want to be indirectly involved with your startup, assuming that it is true and that this guy really is the power behind the investments Milner is making.

Pecunia non olet but some money is better refused than accepted, 'success' on the back of stealing from the people of the former Soviet Union is not something to be proud of.

When talking about Usmanov, people seem to lean more heavily on the fact that he was convicted, and thus "pointed questions should be asked", rather than the fact that he was rehabilitated because the charges were fabricated.

Since I don't know Alisher, I can only speak generally, but: I was born in Uzbekistan, and know a few things about the region, and the political history there, so here's my two cents:

Fabricated charges during the Soviet regime were as common as, say, marijuana arrests in the US. This has happened in my family as well: my grandfather was a state judge in Uzbekistan, and his rival framed him on bribery charges, for which he was sentenced to 7 years in a labor camp. My grandfather has always maintained that he was innocent.

How come I believe my grandfather? Because, in the court documents, the sum of money which he allegedly accepted as a bribe was ludicrously low: 50 rubles. That's like taking a bribe for $150

During the 1990's, he was also rehabilitated with the same conclusion: fabricated charges.

But those charges aren't the only reason people ask questions about him.

In fact, the charges are convenient for him, at least with respect to his public image in the West, because he can argue that he was vindicated; PR 101: leverage that vindication to ward off all other claims.

The links to Gazprom and the general public image of CIS extractive industry tycoons presumably contributes as much (if not more) to the cloud over him as the Soviet-era charges.

Money laundering = disguising the path money takes. These transactions are extremely traceable.

It is equally ridiculous to propose the goal is to get money out of Russia. How does investing in startups make that any easier? If the money can get to a startup in the US, ipso facto it can get out of Russia, to any other investment.

I would not be surprised to see such an obviously mistaken comment upvoted on reddit, but it is an alarming sign to see it happening here.

> Money laundering = disguising the path money takes.

indeed.

> These transactions are extremely traceable.

Sure they are.

But the source of the original fortune behind all this is pretty murky and money laundering does not stop at the first stage.

Think of it as onion routing, going further and further into the legitimate world until those that handle the money have no way of proving or even knowing that the original source wasn't legit. It's all about provenance.

> It is equally ridiculous to propose the goal is to get money out of Russia.

Are you familiar with the name Berezovsky?

( http://en.wikipedia.org/wiki/Boris_Berezovsky_%28businessman... )

You can go down as fast as up in Russia, and it doesn't take all that much to cause a fall from grace.

Spreading your assets in multiple countries seems like a good idea in an environment that volatile.

> How does investing in startups make that any easier?

It's a great way to ensure yourself future income and influence, surely one or more of them will pay back big time.

> If the money can get to a startup in the US, ipso facto it can get out of Russia, to any other investment.

Sure, but that won't get you in on the ground floor of a bunch of companies that will likely be very important in the near future. The return on investment in terms of influence could be enormous, it's a risk worth taking.

Better than buying standard oil or microsoft for an equivalent amount of money.

And if it is monopoly money to them anyway, why not buy that nearly free lottery ticket?

The point is that these money already laundered, most likely it's just basic deversification.

Moreover, you "launder" the proceeds of a numbers racket or a heroin dealing ring. When you control over 1/10th of the metals industry in one of the world's largest industrialized nations, you don't "launder" the proceeds; you create banks to hold the money.

The "money laundering" charge does a disservice to any legitimate qualms one might have about Oligarchy funds.

When Soviet Russia imploded in the former USSR and in lots of satellite states huge amounts of state owned real estate and means of production changed hands for peanuts.

It was probably the largest theft in our lifetime and whether you call eventually turning that into assets in western countries laundering or not is arguing semantics.

Ill gotten gains get converted into more diversified and more respectable assets.

Basically these men (and their predecessors) stole a country, the fact that that gives them access to mechanisms that ordinary criminals can not afford does not place them morally above them at all in my opinion.

This period is sometimes referred to as the rape of Russia, but that makes it sound like it is over, which is far from the truth.

Exactly. The real question is whether it is a difference in type or a difference in scale. "Laundering" may be a dirty word used to make things untracable, but it is equally possible to do unseemly things so well that no one can call you to account. If so, you do not need to launder your money -- but the question remains as to whether or not what you are doing qualifies as a difference in type.

I would not be surprised to see such an obviously mistaken comment upvoted on reddit, but it is an alarming sign to see it happening here.

This comment implies you peek at the number of points a comment gets before responding. Do you?

Well, we don't know if it's upvoted since we don't see the score.

I think, what 0x12 is trying to say, that highly-leveraged investments are a great way to launder money: i.e. you may have only 10% in "clean" money, leveraged 10:1 to cover over 90% of "dirty" money.

I don't think this is the case with DST. This is just a usual case of envy.

I'll take DST money any day. Hell, I'll give 10% of my company to Yuri Milner, any day, even without the investment (this is not a legally binding promise).

One may think, that early bet on Facebook is not a per-say highly-leveraged, because it must be paid in full cash.

In practice it's such a risky investment, so it should be considered more like an option or outright gamble.

There are legal reasons why you do it as well..lets say you legally got out of paying high 45% corp tax rate by parking profits offshore in Europe. Than obviously you would re-invest those profits in Europe Social-Media start-ups as you would only have ot get a return of 70%.

Prices of raw material inputs to energy, Metals, etc went from high to low and back again during Russia's past recent history and we are making unfounded assumptions in this thread that have very little to no basis in fact.

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