Two scammers, a web of betrayal, and Europe's fraud of the century | Hacker News Reader

Two scammers, a web of betrayal, and Europe's fraud of the century

magazine.atavist.com

150 pointssamclemens71 comments

According to [1],

> In 2008 and 2009, multiple groups of fraudsters took advantage of differing tax rules in different EU countries to buy and sell carbon credits, or permission to emit carbon dioxide, on exchanges in Europe. The scammers would buy the credits in a country with no value-added tax, and quickly sell them in France or other countries that did charge VAT.

> Stephane Alzraa, 38, was extradited from Israel following a request by French authorities.

> Aknin remains in Israel, where he is fighting extradition

This 39 year old Michael Aknin seems to fit the story...

[1] https://www.timesofisrael.com/trial-starts-for-franco-israel...

Is that fraud or just arbitrage?

> Is that fraud or just arbitrage?

It's VAT fraud, so literally tax fraud.

If you read the article, it's fraud.

They ran the exact same fraud as had been run on cell phones.

> Criminals imported phones from other EU countries, sold them to consumers with VAT tacked on, pocketed the tax, and disappeared before anyone was the wiser. Or they used carousel schemes, pretending to sell phones through a chain of businesses created for the express purpose of fraud and requesting VAT reimbursements from governments at each point of sale.

This way of cheating with VAT is as old as there is a pan-European VAT agreement (the way to declare and manage it, not the amount). And sure as hell, there is always someone to try it. And sure as hell, someone is surprised they ultimately get cought...

They pocketed the sales tax and then never sent it to the government.

Where / what are these "exchanges" in Europe? examples ?

They are mentioned many times in the article. Powernext and Bluenext.

Israel does not necessarily extradite for financial fraud, that is why Aknin is fighting it in court. There are many legal maneuvers available in the Israeli court system.

Israel refuses to extradite child rapists; hardly surprising that they'd refuse to give up mere fraudsters.

Neither does France

Only if you’re a French citizen do they not extradite. Might try you locally for your crimes abroad though.

> Might try you locally for your crimes abroad though.

Not for child rapists though[1]…

[1] https://en.m.wikipedia.org/wiki/Roman_Polanski_sexual_abuse_...

famous child rapists. Non-famous child rapists need not apply for special treatment.

As far as extradition is concerned, in France, people with dual nationality (or several nationalities) are considered to be French and benefit from the rules applicable to French nationals (refusal of extradition). However, the date on which the offence was committed determines whether the perpetrator was French at the time of the offence. This is the point that poses a problem, as most of the perpetrators applied for Israeli nationality after the fact.

Very few countries extradite their nationals. The question is whether they are prosecuted in their country. Judicial cooperation between France and Israel is very poor. The problem with Israel is that it lets murderers go free. There are several scandalous cases of refusal to extradite and prosecute (an ex-policeman swatted the father of a rival in a scam buisness, the elderly father died of a heart attack). This has prompted the French state to mount operations with the Italian and Cypriot police to arrest French-Israelis outside of France.

I think it's Cyril Astruc. His parents fit the job descriptions in the article: tailor and teacher.

Absolutely. Also searching for his name shows pictures that perfectly fit the physical description and Vanity Fair link in the article.

Of course, it could just be one of his many pseudonyms ;)

Bingo. "He dressed in blazers cut from blue velvet or embroidered with shimmering brocade flowers. He liked to wear a diamond-encrusted Chopard sun pendant on his partially bared chest."

https://image-uniservice.linternaute.com/image/450/105809602...

Funny that he is now into… cryptocurrencies. The man has experience with bogus markets.

> The way the system was supposed to work was simple enough: The EU would set an annual cap on its overall emissions, then issue various emitters a certain number of EU allowances. Each EUA would entitle its holder to emit one ton of carbon.

I'm a serial pirate and I'll only do worse next year. Can you pay me to pirate a bit less next year, while giving nothing to those that never pirated at all?

It’s not really comparable because the pollution was being generated as a byproduct of a presumably useful service or industry. This puts polluters under a regulatory limit that didn’t exist before, gives the time to adjust while also providing an early incentive to decarbonise sooner rather than later (they can sell the credits they didn’t need to use).

Yes that is totally comparable. After all, those emitters didn't do anything of use to anyone. It's especially bad when you consider that there countries that have successfully prevented this industrial crime: Afghanistan, Chad, Ethiopia, Madagascar, Laos...

You forgot China and the US. Now your list is not that impressive, is it?

> I should say here that Gustav Daphne is a pseudonym. He remains a wanted man in France, so when I traveled to meet with him at his gated villa in Tel Aviv, he agreed to speak on the condition that I not use his name—any of his names.

This caught my attention and I decided to do some sleuthing to see how hard it would be to figure out the real name and... there's dozens of people that might fit the description [1]. The cynic in me notes that they all seem to have dogs that the journalist just has to write, I guess as some sort of PR technique via emotional hook.

> He made contacts and built extensive networks of people willing to help him import and export fake goods, and he traveled around the world despite the risk it carried.

Took quite a turn towards the end. He didn't turn over a new leaf, at all.

[1] https://www.lemonde.fr/en/international/article/2023/06/03/t... (https://archive.ph/yG1dN)

I'd love to listen to a podcast about this.

When I saw "fraud of the century" I thought it was the OneCoin scam (Ruja Ignatova, "The Crypto Queen"). BBC did a very detailed investigative podcast about that one: https://www.podbean.com/podcast-detail/uj5nz-a0b8a/The-Missi...

I was thinking of Wirecard. There's an awful lot of centry-level financial fraud going around right now.

https://www.newyorker.com/magazine/2023/03/06/how-the-bigges...

Wirecard was €1.9 billion. The cum-ex trading scandal siphoned up to €55 billion. My lawyer went to school with one of the major guys involved.

https://theconversation.com/the-robbery-of-the-century-the-c...

Wirecard's max market cap was $27 billion, which puts it in the ballpark of Enron, which was itself a scale of the century. That is of course an inflated value, both by market cap being inflated, and inflation having occurred between the two events, but wirecard card is worth mentioning - when it broke, who could have imagined that we would have three or four more of these?

Comparing Market cap to fraud amounts isn't really sensible.

The €55 billion was income and you shouldn't usually compare income to market capitalisation. Unless you are comparing against NAV fraud (which is made up numbers so NAV fraud is _somewhat_ meaningless!)

CumEx was my first guess as well. Not some basic run the mill VAT cheating.

> He bought her a Bugatti in green, like her eyes.

> The problem was that he lacked capital. He needed more than the 80,000 euros he’d received from El Ghazouani.

A Bugatti is like a few million dollars no? This discrepancy doesn't make sense to me, if he already had the money on that scale why did a few hundred thousand euros of investment matter so desperately?

Lombard credit on fake accounting?

> A Bugatti is like a few million dollars no?

Back then when they were new it was more like 800k.

But yeah, this part stood out for me as well. My guess is he either financed the car, or didn't pay for it at all (just have it repo'd, you'd still have impressed the girl). Or the whole story is fake, you never know with these kind of serial scammers, their whole life is a lie.

Netflix has a great documentary about this story. The french name is « les rois de l’arnaque ».

A mini-series was also recently released: Of Money and Blood.

Trailer: https://www.youtube.com/watch?v=fLzlimhCdkA

Based on Fabrice Arfi's book of the same name. He works at Mediapart, a french journal that outed many state scandals. He's also one of the four french members of the International Consortium of Investigative Journalists (ICIJ).

Lords of Scam is the English title.

Like FTX/SBF, this person would have probably become an accomplished businessman, if his criminal mind wasn't in his way. Fascinating to read how crafty those people in exploiting any gaps where potential profits could be made. They are like is financial "hackers" that can segfault some .org.

Like SBF?

yes, you are right !

> criminal mind

Good white-hat hacking (tax|legal|financial|computer) also requires a criminal mind I believe!!! Bending or twisting rules and knowing which rules to break! Criminality is dependent on your context. Risk/reward is a key feature of economics.

My personal word for a drug-dealer is entrepreneur.

People who say this usually come from a place of privilege. They profoundly misunderstand how the world works and the significant role of luck. If these people hadn't cheated, they would be broke and struggling to make ends meet. I never met anyone in my life who made any serious money without some kind of cheating or fraud or unethical conduct either by them or their ancestors.

>I never met anyone in my life who made any serious money without some kind of cheating or fraud or unethical conduct either by them or their ancestors.

You have picked a wrong crowd. That is on you. Go talk to surgeons, doctors, pharma researchers - very decent people, who made/make serious money.

>> surgeons, doctors, pharma researchers

Who paid their rent and university fees while they were studying for 10 years to become a doctor?

Are you insinuating that surgeons, doctors, pharma researchers cannot pay rent and university fees without their parents resorting to illegal activity?

There are such well known things as student loans, working whilst studying (some very successful doctors have talked about having to bus tables whilst studying)

10 years?

Where are you?

It can be 3 year Bachelors degree + 4 years M.D. (seven years total) with the opportunity to earn money as a resident or rural practitioner while completing the M.D.

https://study.unimelb.edu.au/find/pathways/doctor/

If your grades are good you can be accepted and either pay back fees when earning or ride through on a scholarship if good enough to qualify.

You must spend a long time in residency with brutal working hours and typically very little pay. It's been a well known complaint for years that this system tends to naturally exclude people who don't come from privilege.

In my student days there was an entire street scheduled for expansion that had 80 odd houses down one side as cheap rents by the main roads department, I shared a house with seven other students, four were medical, none came from any privilege other than relatively secure working class - two came from farmers, one from a boilermaker, the other from a telecom line working family.

There are people willing to work long hours for little return with the prospect of a better job after an apprenticeship.

Medical degrees are offered globally, not all locations only allow the children of privilege to become doctors.

The time investment is more than ten years easily. In Europe at least.

Who paid? Their parents. Grocers, school teachers, plumbers... also lawyers of course, but in Europe you don't need to have rich parents to study medicine.

I assume when the parent says "serious money", he means 9 digits plus.

That is "the parent".

Criminals tend to think that everybody else is a criminal too, and get offended when caught because they feel singled out. But it's not true, it's just a coping mechanism they adopt to excuse themselves.

It's amazing how pervasive this mentality is. The premise of buying something for one amount of money, processing it and then selling it for more is totally alien to people in this mode of thinking. In their mind, a man could not possibly make money by buying uncooked hotdogs, cooking them and selling them for more. No, he must be stealing the hotdogs, or using fake hotdogs, or stealing the wages of his employees, or some other scheme. Anything other than simple honest business, which they feel sure cannot exist.

Unfortunately you seem to be thinking in this mode, since evidently you believe that criminal activity is the only way somebody could get through medical school.

Well it's hit and miss but these days you can point me to just about anyone who you think earned their money 'fair and square' and I can point out many different ways that it was not quite as 'fair' nor 'square' as it seems. The role of privilege is just so significant.

Privilege is often the product of unethical machinations that happen behind the scenes or happened behind the scenes at some point in the past. Once you understand that value creation and value extraction are two very different concepts and that only the latter is rewarded AT ALL, you start to understand how we got to where we are today. It's not value creators who are rewarded. Over long periods of time, our system almost completely dispossesses value creators for the benefit of value extractors.

Money, in its current form, is the root of all evil. In a highly competitive global environment, you cannot win without cheating. That's a probabilistic fact because if there are 10K intelligent people competing in the same area (which is very common in global markets), the probability that maybe 100 of them will be cheaters is very high and the cheaters have a huge competitive edge over the non-cheaters, hence the winner in a winner-takes-all market is much more likely to be a cheater.

It seems to have been pretty basic VAT fraud. Nothing smart or havky about that. Happens dozens of times every day at various scales. And each and every time it is just plain old tax fraud.

it is very simple fraud, but someone still has to come-up with how to make it work. carbon credits(figure out how to buy them) -> VAT fraud(figure out how/where/to whom to sell them) -> Profit(Hide profit/launder/invest). It is not much different from the cigarette fraud in the US. Buy cheaper in Maryland -> sell for more in New York,where taxes on cigarette are higher. Distance between NYC & Maryland is about 3-4h.

I don't know if it's available outside France. But Netflix has made a documentary in french about Marco Mouly "Les Rois de l'arnaque" / "Kings of the scam". The least we can say is that he's a real piece of work. Most of the people involved are such caricatures of sephard that you wouldn't put them in a work of fiction. The man is a clown, boasts, lies, but at some point you can also see the fear in his eyes when his daughter is 15 minutes late because he fears for the lives of his loved ones. It's really the story of a couple of small-time VAT fraudsters from a poor Parisian suburb who stumbled onto something way too big for them and got caught out by some real gangsters.

https://www.netflix.com/title/81092697

Available in 33 countries: https://unogs.com/movie/81092697/lords-of-scam

Thanks for the Netflix link. I tried to read the story in earnest but couldn't understand the mechanics of the scam well. Probably the documentary will explain it more.

What, praytell, is a caricature of a sephard?

Quick google search brings up a subset of Spanish Jewish population. Not sure if this was a typo or if it's a very specific regional slur?

I (a Jew) generally abhor the ADL and friends' behavior in public, but in this case I hope strongly for a typo. Figuring the best approach is to offer the poster the chance to present something plausible.

The two main Jewish populations in France are Sephardim and Askenazim. Both have associated stereotypes that are widely used in French Jewish humour. Sephardim are regularly portrayed as extravagant pokers player, huslters and show businessman. A good example of this stereotype is the film series "La vérité si je mens", "Would I Lie to You?" https://www.imdb.com/title/tt0120471/r.

Marco Mouly is a poker player, huslter, fraudster, compulsive liar and many other thing. Even in a film or a standup he would be too much to be true.

Those are the two major Jewish populations... everywhere.

I know things are different in France, but in the States the rule is generally that "only the fat kid gets to make fat jokes", and making comments like "caricatures of sephard" is in extremely poor taste.

France is also a tragicomically racist country, so "where I'm from" doesn't exactly cut the mustard for enlightened commentary.

Just because we control the media doesn't mean that you can make jokes about it (and this is an example of the Jew telling Jew jokes).

So when does Netflix make a limited series based on this.

I think they already did in 2021 called "Lords of Scam".

"Lords of Scam" (2021) Original title: "Les rois de l'arnaque" | 1h 45m | Documentary

https://www.netflix.com/title/81092697#

https://www.imdb.com/title/tt15711402/

This was a fascinating and well-written read. Thanks for submitting it!

Wow.. that is so crazy. Thank you for the good read

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