Top US investor in charge of £3bn Russian hedge fund jailed over alleged £29m fraud

Prosecutors allege Michael Calvey conspired with criminal gang to defraud bank

A Russian court has sentenced a prominent American investor to two months of pre-trial detention in a development that has sent shockwaves through the country’s business community.

Michael Calvey, the founder of Baring Vostok Capital Partners, was one of several executives arrested on Friday.

He is one of the last major western private equity investors to remain in Russia, with his investment company claiming to have raised nearly $4bn (£3.1bn) in capital.

On Friday, a judge ordered Mr Calvey be detained for 72 hours, but agreed to a longer restriction less than a day later.

Prosecutors allege that the American investor was part of a “criminal gang” that defrauded a bank of 2.5 billion roubles (approximately £29m). They accuse him of undervaluing shares transferred to a debt collector company in a related-party transaction.

In a statement, Baring Vostok said the charges that have been brought as a result of a commercial conflict with the alleged victims. The company has an active arbitration claim in London against the prosecuting party, which alleges a dozen cases of fraud.

Mr Calvey has denied the charges. In court, he said “almost none” of the charges were true, and challenged the alleged victim to sell the shares to see their true market value.

“You can easily learn the real value of the shares — which really comes to between 2 and 3 billion — as verified by an independent valuer,” he said.

The case puts extra pressure on Russia’s already troubled investment climate. On Saturday, Kremlin spokesperson Dmitry Peskov confirmed that Vladimir Putin had been informed about developments. But local media reported that his leading finance officials had been kept in the dark.

The former economy minister Herman Gref said he knew Mr Cavley as an “honest man” and expressed hope that the criminal prosecution was the result of a “misunderstanding”.

But the future does not look promising for the American investor. Prosecutors have asked custodial sentence of three years imprisonment, and the expectation must be that they will be successful.

In court, Mr Calvey said he “believed in the objectivity of the Russian judicial system”, and that he had been on the receiving end of many “just” verdicts.

Less than 0.1 per cent of all criminal cases brought in Russian courts end in acquittal.