Seized Russian yachts could soon be auctioned
The Justice Department caused a stir when it announced that the task force set up to seize the assets of Russia’s wealthiest citizens had captured its first major acquisition: Tango, the 255ft megayacht owned by sanctioned oligarch Viktor Vekselberg.
But the economy of keeping a vessel worth an estimated $90 million afloat as the Justice Department pursues charges of bank fraud, money laundering and sanctions violations against Vekselberg – and the details from the seizure of ill-gotten gains by suspected criminals – means that Tango could soon end up on the chopping block in order to repay the phenomenal transport costs of a ship that can accommodate 14 guests and 22 crew.
“If maintenance and storage become prohibitively expensive, the government can go to court and say, ‘We want to sell this and reduce it to cash,'” said Stefan Cassella, a former federal prosecutor and asset forfeiture expert and in silver. money laundering law. Vekselberg “couldn’t object to the government auctioning it off at fair market value and turning it into a liquid asset. And that often happens. »
Last month, following Russia’s unprovoked invasion of neighboring Ukraine, President Joe Biden pledged in his State of the Union address to join European allies in finding and seize the yachts, luxury apartments and private jets of billionaire oligarchs close to the Kremlin.
“We come for your ill-begotten gains,” Biden said at the time.
Tango’s seizure is the first luxury asset seizure by the Federal Bureau of Investigation, Andrew Adams, director of the Justice Department’s KleptoCapture task force, said during the yacht’s seizure. But is far from the last.
“Today’s seizure of Viktor Vekselberg’s yacht, the Tango, in Spain is the result of an unprecedented multinational effort to enforce U.S. elite sanctions that enabled the unprovoked and unlawful invasion of Spain. Ukraine by Russia,” Adams said. said at the time. “For those who have linked their fortunes to a brutal and lawless regime, today’s action is a message that these nations dedicated to the rule of law are also dedicated to separating the oligarchs from their sullied luxuries. This seizure is just the beginning of the task force’s work in this global effort to punish those who have supported and continue to support tyranny for profit.
Federal law enforcement officials familiar with the task force’s work, however, told The Daily Beast that the impressive transport is as much a complication as an accomplishment. Seizure of physical property suspected of being linked to a criminal enterprise – cars, homes and jewelry – is often a little more manageable than a 255ft megayacht.
“A Bugatti can be kept under a tarp in a garage until a deal is done,” a federal law enforcement official told The Daily Beast. “The same cannot be said for a yacht the length of a football field.”
Tango, who according to Superyacht timetables is currently the 189th longest yacht in the world and features a private owner’s deck, counter-current swimming pool, open-air cinema and massage parlour, is far from the most extravagant of the yachts that have been seized by international authorities since the implementation of sanctions against Kremlin-allied oligarchs following Russia’s invasion of Ukraine. Dilbar, the world’s largest yacht by gross tonnage, was seized earlier this month by Germany. It has two helipads and the largest swimming pool ever installed on a yacht.
But even the relatively unassuming Tango will cost a small fortune to keep afloat. In the world of yachting, the general rule of thumb for a crewed vessel’s annual carriage costs is around 10% of its list price, with this percentage increasing depending on the yacht’s size, sophistication and quality. current navigation.
Megayachts have dozens of crew members for a reason, not just to serve daiquiris to guests and change their sheets, but also to keep the ship from collapsing. Some of the risks include salt damage to hull and upholstery, seawater entering fuel tanks causing bacterial growth of “diesel bug” in the engine, barnacles, exposure to sun and even seagull droppings. Anyone can wreck a yacht in slow motion, which means those freshly seized assets could be worthless by the time their owners’ cases are judged.
The majority of yachts seized so far have been seized by foreign law enforcement, many of whom seem content to allow them to fall fallow while waiting. But in the United States, the US Marshals Service is often tasked with taking custody of seized assets and are required by law to maintain them, even if the yacht remains moored at the Real Club Nautico in Palma, Mallorca.
“If the government takes possession of it, then it is responsible for storage and maintenance costs until there is an interlocutory sale,” Cassella said.
Although sometimes the work is contracted out to a private contractor, the costs are often covered by an Asset Forfeiture Fund, built up from the proceeds of seized assets – things like watches and furs, rather than bricks of silver and machine guns – sold for their commercial value.
In practice, this can be achieved by requiring the owner of seized property to fund the maintenance of their car, boat or plane, or by using proceeds from confiscated property sold at auction to keep them in working order.
But in the case of the Task Force KleptoCapture targets, those sanctioned cannot afford their crews or mooring fees as they fight to win back their yachts due to restricted access to their own wealth. This effectively prevents Vekselberg, who was worth an estimated $10 billion before sanctions were implemented, from paying about $4 million per year to keep Tango seaworthy, even if he wanted to.
And given that Vekselberg is overseas and has enormous resources, the case, Cassella said, could drag on for years — with U.S. Marshals on the hook in the meantime.
“It could go on for a really long time,” Cassella said. “Forfeiture cases of this complexity, with this amount of money, could last five or ten years.”
According to the Luxury Yacht Group, this could mean that total government transport costs for Tango could stretch up to Tens of millions– even potentially exceeding the value of the yacht.
The US Marshals Service has the option of putting the boat up for auction, like a cocaine smuggler’s lightly used Dodge Viper at a police auction. The money would be held in escrow until Vekselberg’s case is resolved.
But the international superyacht market has collapsed along with the rest of the luxury goods economy – rising fuel prices hit hardest when it takes 202,000 liters of premium diesel to fill your tank – meaning that potential megayacht owners could end up scoring a major deal.
And Vekselberg, a State Department official familiar with sanctions efforts joked, could learn a critical lesson about owning luxury goods.
“If it floats, flies or fucks,” they said, “rent, don’t buy.”