CL-2021-000649 - [2025] EWHC 1333 (Comm)

The asset transfers are complex. The summary below is substantially taken from the account set out by the Claimants, so it may be that not all of it is accepted by VTBC.

Mr Gerasimenko became involved in the business of the Red October Group in October 2011 when he was appointed as an executive director of VMZ, having been invited by Mr Sienko (a Putin associate), to assist in carrying out a turnaround of the Red October business. Mr Sienko arranged for the incorporation of AO Volgogradskiy Metallurgical Combine “Krasny Octyabr” (“VMK”) to acquire the assets which had been held by SWRO and VMZ. In around May 2013, Mr Sienko invited Mr Gerasimenko to take control and ownership of VMK. In June 2013, Red October International SA (“Red October Switzerland”) of which Mr Gerasimenko was the ultimate beneficial owner acquired VMK’s shares from JSC ORT (“ORT”) for approximately $6,885,000.

Prior to Mr Gerasimenko’s involvement in the Red October Group, in May 2009 SWRO and VMZ had transferred most of their assets to RusSpetsMash LLC (“RSM”) by way of capital contribution to RSM in return for shares in RSM (“the RSM Transaction”) so that the shares in RSM were divided between SWRO and VMZ to reflect the value of their respective contributions. VMZ contributed assets with a nominal value of 1.775 billion roubles (“the VMZ Capital Contribution”) in return for a shareholding of 92.6353% in RSM. SWRO contributed assets with a nominal value of 141 million roubles, comprising 92 items of immovable property (“the SWRO Capital Contribution”) in return for a shareholding of 7.364% in RSM.

The VMZ Capital Contribution (but not the SWRO Capital Contribution) was successfully challenged by one of VMZ’s creditors, Gazprombank, on the basis that it was unlawful and void because it had been carried out for the purpose of harming creditors. By a judgment dated June 2010 the Russian Arbitrazh Court for the Volgograd Region (“the June 2010 ACVR Judgment”) ordered RSM to return the assets comprising the VMZ Capital Contribution to VMZ.

Before enforcing its rights under the June 2010 ACVR Judgment, Gazprombank assigned those rights to an entity ultimately owned by the Russian state, RT Capital LLC.

Subsequently in April 2011, pursuant to a settlement agreement between RSM and VMZ (“the VMZ Settlement Agreement”), RSM returned in specie to VMZ the property comprising the VMZ Capital Contribution, save for a minor part of the property (about 1% by value) which could not be returned by RSM as a result of it having been previously sold, written-off, or consumed following the RSM Transaction. The VMZ Settlement Agreement was approved by Arbitrazh Court for the Volgograd Region the ACVR in a judgment dated June 2011 (“the June 2011 ACVR Judgment”). That Judgment recorded that RSM was not able to return the whole of the VMZ Capital Contribution to VMZ and that RSM was therefore liable to pay monetary compensation for the property that could not be returned and for the use of the property prior to its return. The June 2011 ACVR Judgment recorded that RSM had agreed to pay monetary compensation in the sum of 183,281,167.61 roubles, about 10% of the value of the VMZ Capital Contribution.

On 24 August 2011 RSM entered into an insolvency procedure. According to a document prepared by the office-holder in RSM’s insolvency the total value of the property which could not be returned by RSM to VMZ because it had been sold on, worn out, or consumed was approximately 19,421,000 roubles (around 1% of the total value of the VMZ Capital Contribution) for which RSM agreed to pay monetary compensation to VMZ. RSM also agreed to pay compensation to VMZ for wear and tear or depreciation of the property comprising the VMZ Capital Contribution in the sum of 163,860,000 roubles (around 9% of the total value of the VMZ Capital Contribution). The total monetary compensation which RSM agreed to pay to VMZ therefore matches the figure set out in the June 2011 ACVR Judgment. The assets comprising the VMZ Capital Contribution which were returned in specie to VMZ were ultimately acquired by VMK from the liquidators of VMZ from the summer of 2013 onwards. VMK did not acquire any assets which had formed part of the VMZ Capital Contribution other than those which had been returned in specie to VMZ.

As to the assets comprising the SWRO Capital Contribution, pursuant to contracts of sale in April 2011, RSM sold property including the property comprising the SWRO Capital Contribution to Innovation, Revival, Development LLC (“IRD”) for 129.7 million roubles. The liquidator of SWRO brought a claim against IRD to recover the assets comprising the SWRO Capital Contribution. That claim was rejected in a judgment of the ACVR dated 20 April 2012 (“the April 2012 ACVR Judgment”). The ACVR held that the SWRO Capital Contribution (unlike the VMZ Capital Contribution) had not previously been challenged in SWRO’s insolvency proceedings and that IRD was a bona fide purchaser of the relevant assets. The assets comprising the SWRO Capital Contribution were subsequently acquired by JSC ORT by a further transaction (“the ORT Transaction”). At the first stage of the ORT Transaction, on 25 June 2012 ORT entered into a loan agreement with IRD (“the IRD Loan”) pursuant to which ORT advanced a loan of 95 million roubles to ORT in June 2012. On 23 July 2012 IRD entered into two settlement agreements with ORT pursuant to which IRD transferred property (including the assets comprising the SWRO Capital Contribution) valued at 95,455,479.40 roubles in repayment of the IRD Loan. On the incorporation of VMK on 20 December 2012, ORT contributed all of the property it had acquired pursuant to the ORT Transaction (including the assets comprising the SWRO Capital Contribution) to the authorised capital of VMK. Thus Mr Gerasimenko through Red October Switzerland and VMK came to acquire, from June 2013 onwards, the assets of the Red October Group which had previously been held by SWRO and VMZ.

I have set out these transactions in some detail because they are relied upon by the Claimants as showing that Mr Gerasimenko had no part in any wrongdoing in relation to the transfer of assets and there is no suggestion in the judgments of the ACVR that he did.