I am often rude about how utterly predictable financial criminals are in what they choose to buy – large watches, gold-spattered handbags, ugly yachts, etc – so I want to give a very small amount of credit to Su Binghai, a money launderer with an imagination. Okay, so he bought nine apartments in London, spending about $21 million just a week after he evaded police in Singapore. And, sure, he abandoned a collection of supercars in Singapore, all of which is tremendously dull. But then among the assets seized by Britain’s National Crime Agency (NCA) were “dinosaur remains, between 145 million and 157 million years old… of a mother and baby Allosaurus, as well as a Stegosaurus.” Dinosaurs! Aren’t they gorgeous? So much more beautiful than a boring old car.

The extinct mega-beasts were sold at a Christie’s auction last year for around $15 million, but are now in a warehouse, presumably ready to be resold, (unless the NCA plans to keep them. I can see the appeal of having something so magnificent as a dinosaur skeleton as a centrepiece in your house, although I do worry a little about the amount of dusting required, which may be why other money launderers have not invested in fossils. “I doubt that any of us will be dealing with one of these again,” said Judge Gavin Mansfield during the hearing. What a shame.

The value of the properties and fossils is a tiny fraction of the amount already recovered in Singapore in this case, which is said to have involved more than $3 billion, though it is troubling that many of the fugitives involved appear to have won effective immunity from prosecution in return for surrendering their assets.

Which cryptocurrency was involved in the scheme, I hear you ask? Well, funnily enough, it was Tether’s USDT like it always seems to be. Involvement in multiple scams has not been holding Tether back. Quite the reverse; in the first nine months of the year, it made $10 billion in profits, and expects to make $15 billion in 2025 as a whole. If Tether is not the most profitable company per employee in the world (it employs about 200 people), I’d like to know what is.

One of the few people who appears not to have been using Tether to hide illicit wealth was the former EU Justice Commissioner Didier Reynders. Though maybe he should have been. Reynders was recently charged with money laundering in Belgium in perhaps the strangest scheme I’ve read about this year. Reynders spent nearly $60,000 on lottery tickets in a single year.

Now, lotteries have been used by financial criminals for a long time. My favourite money laundering approach ever was one used in Puerto Rico in the 1980s when criminals would buy lottery tickets at a premium in cash, then (unconvincingly) explain to the authorities that their wealth was simply the result of weekly outbreaks of good fortune.

According to investigators, however, Reynders was doing something else. He was spending unusual amounts on lottery tickets and keeping the winnings. Why is this strange? Unlike gambling in a casino, lotteries are not a good way to launder money, because they distribute as prizes less than two thirds of what people spend on tickets, so you lose a huge amount on the trade. It’s really not very clever and, clearly, the unusual spending pattern raises the authorities’ suspicions. Reynders denies laundering money, and says he was just using private wealth. Whatever happened, he has a lot to explain.

The thankless task of crypto regulation

Reynders may not have tried to launder money via crypto, but many financial criminals do. And over in Washington, DC, regulators have got to do the boring-but-important work of figuring out how exactly the new GENIUS act controlling stablecoins will be implemented in practice. So credit to Transparency International U.S. for attempting to bend things in the direction of sanity. “A well-implemented framework can both support responsible innovation and prevent the kinds of corruption and financial crime that erode trust in financial systems and global markets,” it wrote in a letter to the Treasury Department.

Bitcoin prices may have taken a bit of a dip of late (no doubt irritating Donald Trump), but the crypto enthusiasm stoked by the White House shows no sign of abating. Senate Democrats sent a letter to the attorney general after Trump’s pardon of former Binance CEO Changpeng Zhao with a killer final question/essay prompt: “Do you believe President Trump’s substantial business ties to Mr Zhao influenced his decision to issue a pardon? Explain.”

Richard Teng, who now runs Binance, has denied that his company supported Trump’s own (largely moribund) stablecoin USD1 to curry favour with the first family on his predecessor’s behalf. But considering quite how much money the Trumps have made this year (Trump’s net worth has risen by $3 billion, according to Forbes), it seems unlikely they’ll concern themselves overmuch with the rules, let alone the complex, detailed rule-making around the GENIUS act. On the one hand, this leaves the field open for organisations like TI-US to push for good regulations; on the other, Trump will do what he wants, regardless of the regulations.

The Neom debacle

Trump, though, is not yet a law unto himself. Unlike, say, the Saudi royals. I have a slight obsession with Neom, Crown Prince Mohammed bin Salman’s pet development involving a ski resort, a superyacht harbour and The Line, a ludicrous mirrored linear city which a gazillion architects have been designing at a gigundous profit. Anyway, thanks to the FT, we have a deeper dive into this vainglorious horror show than we’ve ever had before.

There are many, many cars in this pile-up: the 30-storey building that would supposedly hang from the top of an arch over the harbour, despite architects warning that it would inevitably fall on everyone’s yachts below; the “hundreds of shuttle cars running back and forth” to pick up the poo because normal sewage systems couldn’t be made to work; the fact no one realised that buying more than half of the world’s steel each year to build Neom would affect steel prices; the airport shuttle envisaged without any room for luggage; the giant pumps required to circulate water in the giant marina; the disaster in store for migratory birds faced with a 500- metre high, 170-km wide mirror and so on and so forth.

“I was in a conversation one day with two physicists, quantum physicists,” says Antoni Vives, then Neom’s chief urban development officer, in a documentary about The Line. “One of them looks at the other and looks at me, and says: ‘you know what, perhaps it’s the time of the poets now. We need poets’.” No, Antoni, we need satirists. Or maybe sedatives.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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There have been some pretty chunky fines imposed by U.S. authorities for money laundering offences over the years. HSBC paid out $1.9 billion in 2012 for moving cash for Mexican mobsters; Goldman Sachs settled for $2.9 billion after being charged with helping kleptocrats loot a Malaysian sovereign wealth fund; and Danske Bank had to cough up $2 billion for moving vast sums for corrupt ex-Soviet officials.

I mention these amounts to put into perspective quite how ginormous the confiscation order secured last week by London’s Metropolitan Police against Zhimin Qian was. She could have paid all the fines imposed for those iconic acts of financial skulduggery in full, and still have had enough left over to buy the most expensive home ever sold, splash out on the most expensive car ever bought, and have a few millions left over for spending money. Before her wealth was snatched away, her net worth matched that of Donald Trump, who’s done pretty well himself over the last, hmmm, nine months or so.

“Between 2014–2017, Qian orchestrated a large-scale fraud in China through defrauding over 128,000 victims and went on to store the illegally obtained funds in Bitcoin assets,” the Met said. She fled to the U.K., where she was arrested last year, and her devices containing the keys to access her 61,000 bitcoins were seized.

There is a little bit of an asterisk next to the size of the seizure, however, since the bitcoins weren’t worth nearly as much when she bought them with stolen money as they are now. At the end of 2018, the year when the inquiry into her crime was launched, her bitcoins were worth around $228.5 million. That is obviously still by any standards a lot to steal but the cryptocurrency has had a wild ride since then, and her haul is now worth $7.24 billion and counting. 

Qian had promised to triple the investments of the people she defrauded, but she actually increased them thirty-fold by stealing the cash and sticking it in bitcoin.

This episode raises some very interesting issues. What happens to the money? Obviously, her victims should get their money back, but what return should they get: just a standard interest rate, which is better than the nothing they have at the moment; the 300 percent she promised them, which would in ordinary times be awesome; or a proportionate share of this incredibly successful crypto-investment? If I was in the U.K. government, I would be arguing for the first option, but if I was in the Chinese government, I’d be aiming for the last.

Western law enforcement agencies normally struggle to get any kind of cooperation from their Chinese counterparts, but this case appears to be an exception. “Through a meticulous investigation and unprecedented cooperation with Chinese law enforcement, we were able to obtain compelling evidence of the criminal origins of the cryptoassets,” stated Will Lyne, head of the Met’s Economic and Cybercrime Command, which is something I have never heard a senior copper say before.

Could this be the prelude to an unprecedented thawing in relations between the U.K. and China, and the dawning of a new appreciation, nay a respect, for the rule of law in Beijing? Or could it just be that Xi Jinping’s people want a chunk of that $7.24 billion? The jury’s out. And it will remain out until those pesky jurors learn to do what they’re bloody well told.

There are some pretty odd, if compelling, details in this whole affair. “Zhimin Qian dreamt that the Dalai Lama would anoint her a reincarnated goddess,” reported the FT, “and that she would go on to become the Queen of Liberland, an unrecognised micronation on the Danube, where she would build the biggest Buddhist temple in Europe”. Qian travelled to the U.K. with a passport issued by the Caribbean nation of St Kitts and Nevis, which she applied for under the false name of Yadi Zhang.

St Kitts pioneered the whole “citizenship by investment” idea in partnership with Henley & Partners, and has done very well from it, as is abundantly obvious if you visit this extremely beautiful country. It may, however, be time for the rest of the world to start wondering why we are quite so happy to offer its “citizens” visa-free travel if this is the kind of person it sells passports to.

Another citizen of St Kitts and Nevis is the blockchain billionaire Justin Sun, who in August became the first Kittitian to sort of go into space. He travelled just beyond the official boundary on one of Jeff Bezos’ New Shepard rockets, which are so ludicrously appropriate in their phallicness that each trip is almost performance art. 

Sun’s involvement in libertarian fever-dream Liberland, unlike that of fellow Kittitian Zhimin Qian, is no mere fantasy. He has been elected prime minister, and says the microstate “is a manifestation of a political philosophy that champions liberty, minimal government intervention, and individual autonomy”. Sun, notoriously, was one of the attendees at a private dinner hosted by Donald Trump in May for the top investors in his meme coin $TRUMP. The dinner was the culmination of Sun’s transformation from a fraudster charged by the Securities and Exchange Commission to a celebrated business associate of the U.S. president. Sun runs the TRON blockchain, which was home to more than half of all illicit crypto activity last year, according to TRM labs. To be fair, if I was in charge of that kind of business, I suspect that I would be in favour of “minimal government intervention” too. 

The contrast between Sun’s fate and that of Qian couldn’t be more striking. The former, however shady his business dealings, gets to dine at the White House, while the latter is scheduled to be sentenced in a British court next month. If only Qian had invested in Trump’s meme coin?

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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There is a saying that the best way to make money during a gold rush is to sell picks and shovels. The worst way, presumably, would be to run a government taskforce drafting regulations for the retailers of picks and shovels.

Perhaps relatedly, Bo Hines – who from January to August was the executive director of President Donald Trump’s council of advisors on digital assets – has been hired to run the US operations of Tether, the company behind USDT, the world’s largest stablecoin. USDT is a cryptocurrency that functions a little like a pick/shovel does during a gold rush. Now Tether will release a new U.S.-based stablecoin called USAT. 

Anyone alarmed by the implications of Hines changing sides can be reassured. There is no conflict of interest, because Hines himself said so: “I stepped down from my roles touching anything related to crypto in the White House and I felt like this was a fantastic opportunity to jump into the private sector.”

It must have smarted for Hines to be languishing in the public sector drafting regulations for the crypto rush, while in the private sector people – including family members of senior administration officials – were making billions of dollars. USDT, the stablecoin Tether has created for the US market, is being marketed in partnership with Cantor Fitzgerald, which is run by Brandon Lutnick, son of Howard Lutnick, the U.S. Secretary of Commerce, so that too is being kept in the family.

In order to guarantee that Tether’s tokens will always be worth the same as a dollar, it owns a lot of US debt: some $127 billion worth at the end of July, which works out basically as $127 billion of free money for the U.S. government.

“Tether is by far and away the most important private-public partnership the U.S. government has, we’re buying more treasuries than anyone else in the private sector,” said Hines, which is an interesting way of defining ‘important’. Once upon a time, the major defence contractors would have ranked top of the list, but now it’s a company that buys debt so Trump can keep cutting taxes for his friends.

This is not to say the U.S. government isn’t concerned about crypto. The Office of Foreign Assets Control has sanctioned Iranian nationals, Alireza Derakhshan and Arash Estaki Alivand, and a network of foreign enablers, who were selling Iran’s oil to raise money for its armed forces via the medium of cryptocurrency.

“Iranian entities rely on shadow banking networks to evade sanctions and move millions through the international financial system,” said John Hurley, Under Secretary of the Treasury for Terrorism and Financial Intelligence. But you’ll scour that press release and related documents in vain for information about what specific cryptocurrency was being used by the Iranians to finance the sale of hundreds of millions of dollars worth of oil. Luckily, you can turn to this bit of analysis from Elliptic: “Alivand’s addresses have received a total of $300 million, while Derakhshan’s have received $442 million, mostly in the USDT stablecoin”.

Oh. 

So, Iran sells oil for USDT; which creates demand for Tether; which buys US government debt. Cut out the middleman and essentially, thanks to the magic of the blockchain, the Iranian and US governments are in business with each other.

It seems a bit weird that the United States so enthusiastically prints $100 bills even though the only significant market for them is organised criminals, who do far more damage than the U.S. makes in profits from the trade. And it’s very disturbing that the government IS making the same mistake with cryptocurrencies.

TUVALU AHOY!

One of the annoying things about financial skulduggery is that new techniques keep getting invented all the time, even as the old techniques remain as useful as ever. If crypto is offshore’s newest manifestation, then flags of convenience are probably its oldest.

Ships have been flying other countries’ flags as a ruse de guerre for centuries, but it only really became a formalised business technique in the 1920s when American vessels reflagged as Panamanian so they could sell alcohol during prohibition. But as with everything offshore, a trick invented for naughty rich folks – in this case so they could drink cocktails without legal consequences – has morphed into a tool for criminals and scumbags to make life worse for everyone.

Flags of convenience are almost ludicrously artificial, even by the standards of other offshore trickery, in that registries often have only the sketchiest relationship with the country they’re nominally part of. The Palau, Marshallese and Liberian ship registries are all in the United States (as was Panama’s, until recently); St Kitts and Nevis’ is in the UK; Tuvalu’s is in Singapore; Togo’s is in Lebanon, etc. Small countries are basically just hiring out their sovereignty so foreigners can do dodgy stuff with boats.

The most recent manifestation of this is in Russia’s shadow fleet of ageing oil tankers, some of which lost their Liberian flags and re-registered under the flag of Gabon (effectively a private company based in the UAE), as they sought to continue evading Western sanctions while they sail through the English Channel. “The ease with which vessels can obtain flags without scrutiny, avoid ownership transparency and escape enforcement actions has created the conditions for an entire parallel shipping ecosystem,” notes the Royal United Services Institute (RUSI) in this fascinating paper.

Western countries have sought to do something about this, and some larger registries have become more compliant under pressure, but that has just encouraged new countries to hire out their flags to all-comers, including “Cameroon, Comoros, Gambia, Honduras, Mongolia, São Tomé and Príncipe, Sierra Leone and Tanzania”. RUSI calls for states issuing flags of convenience to be checked by the Financial Action Task Force, which raises the prospect of blacklisting for rogue actors. 

I am not as a rule a big fan of the FATF (or indeed of how it goes about blacklisting countries), but the situation has got so bad, that perhaps it is the only body that could now make a difference and head off consequences that are almost impossible to overestimate. “Without such action, the shadow fleet will continue to entrench itself as a parallel system that threatens financial security, undermines legal norms, poses immeasurable environmental risk and raises the threat of geopolitical escalation,” RUSI’s paper concludes.

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The full-scale invasion of Ukraine happened more than three years ago, which means full-scale Western sanctions on Russia did too. Concurrently, Russians have had just as long to figure out ways to dodge those sanctions, and I fear Western countries are being a bit too slow in realising quite how good they’re getting at it.

So, props to Transparency International’s exiled Russian chapter for this excellent report on the new laundromat, which has grown out of the Garantex crypto exchange that was shut down in April after a multi-year, multi-country effort. There is something grimly depressing, if inevitable, about the fact that within days of Garantex being snuffed out, it had been reborn. 

“It reemerged under new names, such as MKAN Coin, Grinex, and Exved, morphing into a decentralised laundering system sustained by technical obfuscation and governments’ tolerance,” TI-Russia notes. “Entities tied to Garantex continue operating across UAE, Brazil, Kyrgyzstan, Spain, Thailand, Georgia, Hong Kong, and Russia.”

Powered by the encrypted messaging app Telegram, the skilled launderers behind Garantex’s successors are learning to mitigate their vulnerabilities, rather like bacteria evolving in response to antibiotics. And they have found helpful new hosts, particularly in Kyrgyzstan. 

The rouble-pegged stablecoin A7A5 is, according to Chainalysis, operational largely in office hours, which suggests it is operating more like a shadow bank than the kind of cryptocurrencies beloved of speculators in the West. By the end of July, more than a billion dollars’ worth of transactions were moving through A7A5 every day, with it being used as a bridge between roubles and the dollar-backed cryptocurrency Tether, adding a layer of obfuscation that helps to obscure connections between Russian sanctions-busters and the big crypto operators.

There is nothing too surprising about this: money launderers have nimbly adjusted to limits on their activities ever since there have been attempts to limit those activities. In many respects, the way that Garantex’s successors have spread across jurisdictions, taking advantage of mismatches between legislation and law enforcement capabilities, is just a digital-age copy of the way the drug cartels’ bankers operated in the Caribbean in the 1980s.

Nonetheless, it is depressing that Western governments appear not to be learning as rapidly as their adversaries, and instead are relying on the blunt instrument of sanctions, rather than engaging more proactively with the causes of the problem. This is not to say that sanctions do not have their uses. They are obviously useful as a first step, and clearly very irritating to kleptocrats, otherwise they wouldn’t fight so hard to overturn them. 

For instance, Viktor Yanukovych, the corrupt former president of Ukraine whose disastrous tenure sowed so many of the problems that are causing death and misery today, has been fighting to cancel European Union sanctions against him for more than a decade. He’s now failed to have the courts overturn those sanctions, as has his son, which is wonderful. Yanukovych always seemed to have a tenuous grasp on reality, and this is nowhere more in evidence than in the apparent plot to reinstall him as president of Ukraine after the Russian full-scale invasion, which is detailed in the court’s judgement. The idea that anyone in Ukraine wanted him back goes way past self-confidence and deep into the territory of profound delusion. A weird but true aside: Yanukovych’s press secretary once bit me on the arm to prevent me asking him a question about a ludicrous inconsistency in a speech he’d just made; it was very painful, and very effective.

CHINESE GANGS & MEXICAN CARTELS

Much of the early structures used by money launderers were created in the 1950s and 1960s to serve wealthy people looking to dodge the era’s strict capital controls and high taxes. Just as today, it is the desire of wealthy Chinese people to evade capital controls that drives innovation and growth in money laundering methods.

“Chinese money laundering networks are global and pervasive, and they must be dismantled,” said FinCEN Director Andrea Gacki. “These networks launder proceeds for Mexico-based drug cartels and are involved in other significant, underground money movement schemes within the United States and around the world.” 

The core of the system is that Mexican cartels are earning huge amounts of cash dollars, which they are unable to pay into banks. So they hand them over to Chinese gangs, which in turn sell them to wealthy Chinese people looking to spend in the West. The circle is completed by the Chinese gangs shipping counterfeit goods, precursor chemicals or other things that the Mexicans need.

FinCEN has issued an advisory with guidance on what Chinese Money Laundering Networks look like, which makes very interesting reading, especially its long list of “red flags”, each one helpfully illustrated by an actual red flag. The trouble of course for the U.S. authorities is that most of the action happens outside their oversight.

With one exception: the White House could always seek to limit the printing of cash dollars that are the lifeblood of the whole system. At the very least, it could stop printing so many of the super-convenient $100 bills. But it’s not doing that. On the contrary, the value of dollars in circulation hit a new all-time high in July.

TAKING BACK ILL-GOTTEN GAINS

Among the curious folkways of British politics is that TV dramas have far more impact on political discussion than even the most considered bit of journalism. Misha Glenny’s book, McMafia, came out in 2008 and received excellent reviews for its forensic analysis of organised criminality. But it was only when a TV drama of the same name appeared a decade later that U.K. politicians woke up to London’s central role in laundering the world’s criminal wealth. 

They nicknamed a new legislative proposal “the McMafia law”, and promised it would drive kleptocratic wealth out of London. Spoiler alert: life is not a TV drama, and there was no happy ending. Lawyers fought back, and the impact of the Unexplained Wealth Order was limited.

But, wait, what’s this? The Serious Fraud Office has used an Unexplained Wealth Order to confiscate a 1.1 million pound house! So there is life in the old law yet. Granted the target was not a kleptocrat, but a fraudster; the house was not in London, but in the Lake District; and 1.1 million pounds is a rounding error compared to the 100 billion pounds or so of criminal wealth estimated to pass through the UK financial system every year. But a win’s a win, and they deserve congratulations. “Unexplained wealth orders offer investigative opportunities to pursue assets on behalf of victims and taxpayers. This is our first successful use of this legislation and it certainly won’t be the last,” said Nick Ephgrave, Director of the Serious Fraud Office. Hooray for that.

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As you may have noticed, I’ve been away for a couple of weeks. I spent my days off in Scotland’s Inner Hebrides, in search of the legacy of the only famous person there has ever been with the same surname as me: Sir George Bullough, a late Victorian moustachioed flaneur who inherited a fortune and spent it hard on horses, yachts and the Isle of Rum.

He gifted the island a mausoleum and a castle that is architecturally foul even by late-Victorian standards (“nothing that a good fire and subsequent demolition couldn’t rectify”), but us Bulloughs have to take what we’re given, so I dragged the family off to have a look, even though we are – at least as far as I know – completely unrelated to him. 

In its glory days, Kinloch Castle – which looks vaguely like a sandstone version of Shawshank prison reimagined by someone who’s read too much Walter Scott – was quite something. Sir George imported 250,000 tonnes of topsoil for the gardens, built heated greenhouses for his collections of hummingbirds, alligators and turtles, and installed one of Scotland’s first electricity generators. He paid his gardeners extra if they wore kilts, and built the laundry on the uninhabited north side of the island because his wife didn’t want anyone to see her knickers drying on the line.

Like the Titanic, the castle is a monument to the hubris of the European ruling classes in the years before World War One. Built at vast expense, it relied on a reserve of cheaply-paid labour that vanished with the arrival of hostilities, and – as with the European empires of the time – never recovered.

“There were only the boys left, of which I was one, to maintain the gardens and the greenhouses,” remembered a gardener in a passage quoted in a book on the Bulloughs. “The grapes, the peaches and the orchids vanished, gradually sliding into the wilderness of weeds and broken glass that marks their position today.”

Sir George and Lady Monica’s wealth never recovered either. In her old age, Lady Monica sold the island at a knock-down price to the Scottish government, which has let the castle slip into disrepair, and I can’t say I blame it.

This feels symbolic too. The decades after 1914 marked a collapse in wealth inequality, and a playboy’s crumbling mansion was an apt metaphor for how profligate that whole generation looked to those who came later.

However, the wheel keeps turning: wealth inequality started to grow once more in the 1970s, and is now – including, worryingly, in the United Kingdom – approaching previous heights. “At the top of the American economic summit, the richest of the nation’s rich now hold as large a wealth share as they did in the 1920s,” it says here.

This is bad news for democracy and risks sending us back to a future when those of us whose net worth does not include multiple commas have to live in an isolated hovel in a midgy, rainswept bay and wash oligarchs’ underwear. But bad news for democracy could be good news for Sir George’s folly. Kinloch Castle is on the market for 750,000 pounds, although its new owners are unlikely to be able to move in immediately. “It requires significant refurbishment to return it to full residential or hospitality use. Repair and redevelopment costs are likely to be in the region of approximately 10 million pounds or more,” the estate agent notes. 

Having looked at it, and considering its isolated location, I would say 20 million is a more reasonable estimate but, whatever the cost, surely some of my readers have a few quid they can chuck at the one material legacy left to this world by a Bullough? And since you ask: yes, once you’ve patched the roof, restored the orchestrion and employed some decent chefs, I’d be more than willing to come and stay. The island is absolutely stunning. In buying Rum, if in nothing else, Sir George showed excellent taste.

A NEW AGE OF INEQUALITY

It is sadly easier to spot sell signals after a market has crashed. To his contemporaries, Sir George’s castle – along with the other extravagances of the Gilded Age – presumably looked like a perfectly reasonable thing to spend money on, rather than a symbol of excess and frivolity. I would challenge anyone, however, to look at Trojena and not think that it is a gigantic flashing stop sign for civilisation.

A proposed ski resort in Saudi Arabia, it is being built in mountains where there is almost no precipitation, so all the water must come from the ocean, which is at a distance of 200 km laterally and 2.6km vertically. Once the salt has been removed (at a vast cost in both money and carbon), the water is to be pumped uphill through a metre-diameter pipe, and then stored in an artificial lake, which will provide all the resort’s needs, including for the manufacture of the snow required for its 30km of runs. The 140 meter-deep lake requires three separate dams and will cost $4.7 billion to build, according to Italian company Webuild. Just filling it up will take two years of pumping.

“Webuild will also create the futuristic Bow, an architectural structure that will extend the surface of the lake beyond the front of the main dam. It will be shaped like the prow of a ship suspended over the valley, and will house a luxury hotel, as well as a residential area and a large central atrium, with accommodation and hospitality facilities,” the company stated.

This is part of the Neom project and, like all the other bits, looks like a snazzy futuristic vision in the architects’ renderings, when in fact it is a deranged climate-destroying hellscape, which even Mohammed bin Salman is struggling to afford. Trojena is supposed to be hosting the Asian Winter Games in 2029, but apparently Riyadh has been sounding out whether another city could step in so they can do it four years later. 

My optimistic prediction is that, in a century’s time, regardless of whether Trojena ever hosts a skiing competition or not, someone will be looking at its ruins and making notes for a sarcastic newsletter about the excesses of this age of inequality. My pessimistic prediction is so depressing it doesn’t bear thinking about.

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When I lived in Bishkek 25 years ago, then-president Askar Akayev was so effusive in expressing his desire for Kyrgyzstan to become the Switzerland of Central Asia that the Swiss ambassador once joked that Akayev liked his homeland better than he did. 

It was a pretty understandable hope - who wouldn’t want their poor ex-Soviet republic to become as prosperous and stable as Switzerland? – but it was a forlorn one. Both countries are multilingual and mountainous, but have little else in common. In the end, Akayev fled to Russia, his fall precipitated by the Tulip Revolution. He was the first of three presidents to be chased out of office, only for each new government to be every bit as corrupt and incompetent as those that were overthrown. 

But will it be sanctions-dodging that finally brings Kyrgyzstan and Switzerland together? There is already substantial transhipment of physical goods via Kyrgyz companies to help Russians access goods they’re supposedly barred from purchasing, including luxury cars, but the business appears to be becoming more elaborate.

A GOLDEN OPPORTUNITY

Back in April, the former Binance CEO Changpeng “CZ” Zhao (he stepped down after being jailed in the US, but still owns most of the company) announced that he was advising Kyrgyzstan on crypto reforms. “Such initiatives are crucial for the sustainable growth of the economy and the security of virtual assets, ultimately generating new opportunities for businesses and society as a whole,” said current president Sadyr Zhaparov at the time.

In May, we heard that Kyrgyzstan plans to launch a dollar-pegged stablecoin called USDKG which, fascinatingly, will be backed not – as it is at Tether (USDT) or Circle – with dollar assets, but with $500 million worth of gold from the Kyrgyz government.

“Anyone holding USDKG can redeem it for physical gold in Kyrgyzstan, exchange it for crypto like USDT, or withdraw it as fiat through the traditional banking system,” said William Campbell, who is advising the government in Bishkek on the venture. 

Apparently, the aim is for the cryptocurrency to be used for remittances back to Kyrgyzstan from citizens abroad, as well as legal tender inside the country, but it also looks like an open invitation to money laundering and sanctions dodging. If USDKG works the way he says it will, it will be a state-approved backdoor linking the gold market, the traditional financial system, and the crypto world. It would be in short a 21st-century version of what Switzerland used to be for Nazis, dictators, mafiosi, spies and tax-dodgers, before the rest of the world forced it to go straight (ish).

Last week, the FT published a fascinating investigation into how a fugitive Moldovan oligarch and a Russian bank have created a rouble-backed stablecoin called A7A5, which they are trading in Kyrgyzstan, effectively to gain access to USDT, which they lost when the Garantex exchange was shut under U.S. pressure in March.

“(It is a) friendly jurisdiction that is not so subject to sanctions”, said A7A5’s director Leonid Shumakov. “It is no secret that this jurisdiction is currently helping a lot to cope with the pressure [Russia] is under.”

Earlier this year, the United States sanctioned a Kyrgyz bank that it suspected was trying “to create a sanctions evasion hub for Russia to pay for imports and receive payment for exports”. But it’s not clear what it can do about a stablecoin if it has no connection to the U.S. financial system and therefore no reason to fear the Department of the Treasury.

History shows that when a sufficiently large number of rich people or companies become discontented by government restrictions on what they can do with their money, they will find a jurisdiction willing to earn fees by helping them evade those obstacles. This is how places as varied as Hong Kong, Dubai, the Cayman Islands and Delaware earn a living, and it would not be a surprise if Kyrgyzstan were to join them.

SHEDDING LIGHT ON THE DARK ECONOMY

Britain of course is the granddaddy of all the tax havens, so it’s heartening to see evidence that reforms to try to clean up its rotten financial system are starting to have some effect. In 2023, parliament passed a law to prevent British companies from being quite so perfect a vehicle for the committing of financial crimes, and the corporate registry has issued a progress report.

Highlights include the fact that tens of thousands of fraudulent companies have been struck off the register, many other companies have been forced to update their information to make it accurate, and attempts to create companies with false information have been prevented. Applicants are going to have to verify their identity before they file information, but will also have the right to prevent that information becoming public if it would pose a risk to themselves.

It wasn’t long ago that Companies House was the preferred source for cheap, reliable shell companies used in money laundering scandals globally. And it is genuinely brilliant that efforts are being made to prevent that from happening again (although there is still a long way to go).

It’s interesting as well that UK law enforcement agencies are trying to build ties with foreign counterparts in order to tackle corruption and financial crime, not least since they appear to be trying to encourage American agencies not to retreat from the fight. It will of course take more than a few nice words from the Brits to enthuse Donald Trump’s White House about the merits of fighting corruption, particularly considering the number of attorneys tackling investigations under the Foreign Corrupt Practices Act appears to have been halved.

While on the subject of international cooperation, here’s an interesting paper about the effect on a bank in the Isle of Man of the automatic exchange of information, which was brought in after the 2007-8 financial crisis to make it harder for people to dodge tax. Its analysis is based on leaked data and only covers one relatively small bank in one relatively small jurisdiction, but appears to reveal some pretty significant flaws in the regulations, which may make them less effective than we’d hoped.

And while on the subject of tax havens, the British Virgin Islands has issued proposals for how it might make its corporate registry less opaque, and they are not great. “Most alarmingly,” said Transparency International’s Margot Mollat, “the policy of notifying company owners when their information is accessed puts journalists and civil society actors at serious risk of retaliation and legal intimidation.” This isn’t transparency, Mollat added, “it’s a system that will frustrate scrutiny and protect dirty money”. 

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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Years of sanctions have substantially weakened the Iranian economy, as evidenced by Iran’s keenness to have them cancelled, with sanctions removal a key sticking point in negotiations with the U.S. before Israel began bombing Iranian nuclear sites on June 13. But anyone who thinks sanctions are an all-powerful tool should spend some time speaking to Tehran businessmen. The exchange houses in the bazaar in Tehran can arrange money transfers to and from anywhere you like, no matter what the Office of Foreign Assets Control says.

It’s all coordinated via encrypted messaging apps and, as long as you’re transacting with a major centre like London, Paris or New York, your cash will be ready for collection within a couple of hours. “You can get paid electronically if you have a bank account. You need to be a bit careful about having lots of random payments coming into your account, but otherwise it’s straightforward,” one Iranian told me.

The trick is the same one used at various times and on various continents in Chinese Underground Banking, hawala transfers, or the Black Market Peso Exchange, all of which also exist to provide financial services outside the Western-dominated financial system. Instead of moving money electronically through bank accounts, they transfer value through the trade network, something that Western policy makers really struggle to get a grip of, not least because they often don’t understand what’s going on.

A DIGITAL ACT OF WAR

Cryptocurrencies have really supercharged these networks because, instead of moving value in a shipload of used cars or a container of designer handbags, which take weeks to reach their final destination and are cumbersome to buy, move and sell, they can be shifted quickly, easily and with minimal time delay. Hawaladars can now shift value between countries with their phones, and the sarafis in Tehran are all using Tether, despite the fact they’re not supposed to (I mean, neither are Venezuelans, but that hasn’t stopped the national oil company).

This is why last week’s hack by the Israel-linked group Predatory Sparrow (who are presumably unrelated to calypso king Mighty Sparrow, but I’ll take any excuse to link to this banger) is so interesting. By raiding $90 million from Tehran’s Nobitex crypto exchange it was striking a blow against the informal financial ties between Iranians and the rest of the world. The lost cryptocurrencies included, according to Chainalysis, “Bitcoin, Ethereum, Dogecoin, Ripple, Solana, Tron, and Ton” although the hackers didn’t actually steal them but instead sent them to addresses from which they could not be retrieved, which is a bit like raiding a bank and burning all the currency in its vaults. Elliptic, however, noted that dollar-backed stablecoins may be among the stolen crypto.

Stablecoins are different to other cryptocurrencies in that their value rests on something other than the forces of supply and demand – in Tether’s case, that is the dollar – and the companies that issue them own large stocks of real-world assets to protect the price peg. The strange consequence of this is that while America’s allies use stablecoins to escape the dollar financial system, they are in effect supporting that system by maintaining demand for U.S. Treasuries.

ALL THAT GLITTERS IS CRYPTO

They are not entirely happy about this, which is why they have been investing so heavily in the other great reserve asset: gold, the price of which has hit high after high after high this year. And this raises the fascinating prospect of a gold-backed stablecoin taking off, giving all the advantages of Tether but without having to support the U.S. government.

“The rise of gold-backed currencies that circumvent the US banking system, coupled with sanctioned regimes’ growing interest in the adoption of alternative currencies and payment systems, could create a massive blind spot for US financial intelligence and sanctions enforcement efforts,” argues the Atlantic Council in an acute analysis. It suggests that Western countries should stop spraying sanctions around like they’re antibiotics on a pig farm, or such a future will come to pass sooner than anyone would think possible.

It's a warning that seems to be falling on deaf ears in Washington, where congresspeople are busy debating ever-higher sanctions, and where businesspeople are busy riding the crypto wave. The latest deal is the appearance of Tron on Nasdaq via a reverse merger, which is good news for the company’s Chinese-born founder Justin Sun. As you may remember, a probe by US regulators into Sun’s activities was paused after he made a $75 million investment into the Trump family’s crypto firm World Liberty Financial last year.

This was not the only Trump dividend from the family partnership with Tron, a blockchain blamed for 58 percent of all illicit activity in the crypto world, since two of the president’s sons in February joined the advisory board of the bank that organised the reverse merger. On top of that, Tron has started minting the Trump family’s own stablecoin USD1, which will help increase the first family’s already large crypto dividend.

In case you’re concerned that the business ties between Sun and the Trump family might lead to a conflict between the president’s personal and public interests, however, there is no need to be. “President Trump is dedicated to making America the crypto capital of the world,” White House spokesperson Anna Kelly has said. “His assets are in a trust managed by his children, and there are no conflicts of interest.”  I don’t remember everyone being quite so accepting that Hunter Biden’s business interests were separate to those of his father, but of course that was a very long time ago.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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I’ve been thinking a lot about the apocalypse in the last few days, and wondering what options oligarchs believe are available to help them escape it. In Mark Lynas’s new book about atomic weapons, he helpfully provides a table showing what percentage of each country’s population would die during or immediately after a nuclear war. The sheer number of places that have 100 or a number in the high 90s in the right-hand column is a bit bleak, but if you think like an enabler you can see opportunity.

New Zealand is often touted as the go-to destination for riding out the apocalypse. Vivos has apparently built a 300-place luxury bunker on the South Island, and Rising S Bunkers, an American company that specializes in the building of doomsday shelters, have been busy too. Peter Thiel obtained New Zealand citizenship, though tragically was not able to build his own mega-bunker after he failed to get planning permission. But that has not stopped other billionaires from planning their escapes to the land of the long white cloud.

BILLIONAIRE BOLTHOLES

Politicians in Wellington are only too happy to help. In April, they eased up on the rules around the country’s golden visa programme to attract more of this sweet flight capital, removing a requirement that applicants speak English, and reducing the cost. You now only need to spend 21 days in the country to establish residency, down from three years, which is good news for tech barons keen not to have to pay tax or make friends or stuff like that.

“In the past, the vast majority of applicants were looking for tax havens,” former immigrant minister Stuart Nash told the FT. “Now they’re looking for safe havens.” Nash is a man for the snappy catch phrase. Since leaving government, he has set up Nash Kelly Global, a relocation company, which has the distinctly yuk for an ex-politician but very on-brand tagline: ‘What they don’t tell you about New Zealand. It’s not what you know. It’s who you know.’

But I’m afraid New Zealand is not quite the safe option it’s been cracked up to be. For a start, how safe is New Zealand? Lynas’ deaths table shows that in the event of war, 68 percent of New Zealanders would be dead after two years of nuclear winter. Okay, that’s better than Russia (98 percent), the United States, China, the United Kingdom, Canada, France, Germany (99 percent) or Switzerland and the United Arab Emirates (100 percent), but it’s still not great. And expensive fortifications wouldn’t help: billionaires would not be able to hide forever from gangs of survivors and would be, Lynas writes, “winkled out of their bunkers and hiding places like fat grubs”. 

So, which countries do offer the best survival prospects in the event of Trump or Putin getting an itchy trigger finger? Iceland, Argentina, Paraguay, Uruguay, Costa Rica, Haiti and – painfully no doubt for Kiwis – Australia all have a 0 percent death rate. At present, Iceland does not sell visas, and Australia closed its investor visa programme last year, so it’s no good to you even if you have the cash to flash. But there are plenty of options among the others: Uruguay’s is a bit pricey, but Costa Rica will sell you residency for just $150,000, and Argentina is practically giving it away.

I’m surprised no one’s started marketing these countries to rich people worried about nuclear war: ‘If life sends you nuclear winter, enjoy the fresh powder.’ Mr Nash, you can have that one for free.

ESCAPE TO MARS

Of course, everywhere on Earth is going to be impacted a bit by nuclear war, so why not abandon our planet altogether? Elon Musk’s current plan is for a first unmanned mission to take off for Mars next year, with people due to land on the red planet in 2028, and for a self-sustaining colony to exist within 20 years.

SpaceX has released a handy new video simulation of the journey, though I hope for the Muskonauts’ sake that they won’t have to listen to that dreadful music for the entire eight-month trip. If I was as rich as Musk, I’d have licensed Queen’s ‘Don’t Stop Me Now’ at least. The upside to living on Mars of course is that you wouldn’t be on a planet that could be rendered uninhabitable by a nuclear bomb. The downside though would be that you’d be on a planet that’s already uninhabitable. So, perhaps it would be better to focus on securing the future of Earth instead? 

“Surely the best way to protect the human species in coming decades is to focus on resolving the tensions we face at home, from unbridled nuclear proliferation to strategic global competition and realignment,” wrote noted physicist Lawrence Krauss.

Predictably enough, Musk dismissed Strauss’ argument by tagging @IfindRetards in reply (such a hilarious guy!). But Strauss raises an interesting point. Cold War-era treaties, negotiated to prevent an extraterrestrial arms race, declare that there is no sovereign territory or territorial appropriation in space. Yet, according to Starlink’s terms of service, Mars is “a free planet”, and no Earth-based powers have authority there: “Disputes will be settled through self-governing principles, established in good faith, at the time of Martian settlement.” 

That looks a lot like Musk is claiming the right to govern Mars as its settlers see fit. Of course, it’s not impossible that the new settlers (who will have been chosen by Musk, trained by Musk, brought to Mars by Musk’s rocket, and who will be entirely dependent on Musk for future resupply) might set up a genuinely democratic system of self-government. But it’s also possible that Musk might want to claim Mars for himself. That would be in violation of Earth’s treaties, and therefore bad. It would also – considering the havoc wreaked by Musk in his brief stint in government – be a pretty grim prospect on its own terms. 

Of course, you don’t need to go to Mars to set up your own government. Right here on earth we have Eleutheria, which is now aiming to negotiate a 99-year lease for a bit of Tuvalu to build a “free private city”, having given up on the idea of building a state in a Bir Tawil, an isolated, unclaimed bit of desert between Egypt and Sudan. It is indeed easier to imagine the end of the world than the end of capitalism.

A version of this story was published in this week’s Oligarchy newsletter. Sign up here.

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