Russian allegedly involved in major tax fraud bought South Florida real estate
Last year, President Donald Trump’s private Mar-a-Lago club hosted a black-tie “Safari Night” fundraiser for a favorite charity of one of his older sisters. The event included Chinese dancers, a silent art auction and one unusual guest: Sergey Danilochkin, a Russian real estate investor who had settled in South Florida after authorities in his home country accused him of taking part in a massive tax fraud linked to the most contentious corruption case of the 21st century.
Partygoers had no idea they were rubbing shoulders with a wanted man. While the guests sipped cocktails and studied photos of African wildlife, Danilochkin, who is also an aspiring journalist, filmed the bustling ballroom on a smartphone and posted the footage on YouTube. Holding a flute of champagne and wearing a dark suit, the Russian émigré addressed the camera in his native tongue, alluding to the uncanny way Russians seem to turn up in the president’s orbit.
“The most interesting thing,” Danilochkin said, “is that we met a lot of people here who speak Russian.”
Making it to Mar-a-Lago shows how far Danilochkin — who denies the charges against him — has come. In 2010, he fled Moscow fearing for his life as Russian authorities investigated his alleged role in a $170 million tax fraud. The case became big news, especially once it was linked to the organized-crime group behind the so-called “Magnitsky affair,” a Russian corruption scandal that dominated international headlines starting around 2009.
The Magnitsky affair catastrophically damaged relations between Russia and the United States during the Obama administration, turning Hillary Clinton, then secretary of state and later the Democratic nominee for president, into a top Kremlin foe. It ultimately led to a controversial meeting between top Trump campaign officials and a Russian government-linked lawyer during the 2016 presidential election.
Danilochkin’s exile in South Florida — a magnet for rich Russian expatriates — made no difference to the justice system back home, which has been criticized by international observers for corruption and political subservience. The Russian government put out an international notice for his arrest, and he was eventually tried in absentia before being handed a 10-year prison sentence in 2017. Prosecutors alleged that Danilochkin, an accountant by trade, set up shell companies that claimed five billion rubles in fraudulent tax refunds in 2009 and 2010. That was about $170 million.
The Magnitsky affair centered on a similar style of tax fraud, and was masterminded by the same organized-crime outfit behind the smaller $170 million theft, according to Russian investigative journalists and Danilochkin himself, who says he was used as a pawn and fall guy.
He and his attorneys declined to comment for this story.
In his new South Florida home, the 47-year-old Danilochkin — gray-haired but still noticeably straight-backed thanks to his time in a Russian military academy — has produced a documentary laying out the case for his innocence. The 35-minute film was privately screened at the National Press Club in Washington, D.C., and features Danilochkin answering questions while sporting a comically fake beard.
In December The Washington Times published an interview with Danilochkin, noting that the piece was “sponsored content,” or paid advertising.
“By the will of fate, I was in the path of an octopus of corruption; very powerful people on their way to their dirty goals,” Danilochkin said in the interview. “I never did anything illegal. But I still found myself under the press of the system, just by chance. Whoever has lived in Russia understands how it happens.”
Like many stories about Russians in South Florida, this one requires a scorecard: The kaleidoscopic cast of characters connected to this tale — some tangentially, some not — includes the U.S.-sanctioned oligarch Oleg Deripaska, alleged organized-crime bosses, an American-born financier wanted by Russian President Vladimir Putin and several people close to President Trump.
Danilochkin now lives in Sunny Isles Beach, a popular resort town for Russians and a place where old-world disputes seem to migrate across the Atlantic to roost in South Florida palms. As the region transforms into a haven for wealthy Russian expatriates — helped along by marketing campaigns from developers like Trump — their political and financial machinations have followed. Current and former Russian government officials have owned homes here. Russian expats founded a roving motorcycle club inspired by the nation’s elite special forces. And a suspected Russian assassin was even dispatched to stake out a CIA informant’s Florida residence, according to The New York Times.
Having originally come to the United States on a tourist visa, Danilochkin now wants to stay permanently. He is petitioning a federal court for political asylum.
He presents himself in the documentary as a whistle-blower. If he is returned to Russia, he believes he could be killed — if not by the government then by the Russian gangsters he claims once tried to poison him with mercury.
In the meantime, like so many out-of-town prospectors, Danilochkin has invested big in South Florida real estate. Between 2010 and 2012, he took advantage of the battered U.S. housing market to buy at least 50 rundown residential properties, spending $1.4 million in Homestead, Overtown, Lauderhill and other economically depressed areas. The homes, mainly condos, had been foreclosed by banks during the recession.
His working-class tenants had no idea who he was — or that Russian police were on his tail.
“It’s hard to find a good landlord in South Florida, but that is crazy,” said Waikiki Reddick, who paid $900 per month to rent a Homestead duplex from Danilochkin’s Florida company, Walter Walls, between 2013 and 2014. “You don’t know who to trust when you’re renting.”
Reddick called the place “a dump.” (She was not aware of her former landlord’s identity until being informed by the Miami Herald.)
Danilochkin is locked in litigation with the business associates who sold him the properties. He says the associates, who were subsequently hired to manage the the condos, cheated him and failed to renovate the homes. Danilochkin has since sold most of the properties.
While his real estate investment didn’t pan out, Danilochkin has reinvented himself as the founder and star of a Russian-language YouTube news channel called Russian America TV. On camera he goes by the name Serge Daniloff.
It was in the capacity of newsman that Danilochkin visited Mar-a-Lago for a Jan. 26, 2018, fundraiser hosted by Elizabeth Trump Grau, the president’s sister.
The Safari Night was held to benefit a charity called Young Adventurers. On its website the nonprofit says its mission is “mentoring and motivating” young people. Tickets cost $600, The Washington Post reported. “Diamond benefactor status” went for $10,000.
Danilochkin showed up that night with producers to film the 250 or so guests. They were the first Russian-speaking journalists to report from inside Mar-a-Lago, he claimed. They even scored a brief interview with Israel Joffe, an official at the Food and Drug Administration who attended the party. (The FDA says Joffe, who did not respond to requests for comment, was there as a private citizen.)
The video opens with a swooping shot of Mar-a-Lago set to Queen’s “Bohemian Rhapsody.” It has been viewed more than 10,000 times on YouTube.
Trump visits Mar-a-Lago often, sometimes hosting foreign leaders there. But the president was not in Palm Beach for the charity event, according to the Palm Beach Post. First lady Melania Trump had been at Mar-a-Lago but left before the fundraiser started, the Palm Beach Daily News reported.
Someone else who has recently made big news did attend the Safari Night gala, however: Li “Cindy” Yang, the former owner of the Jupiter massage parlor at the center of the prostitution investigation that netted criminal charges for Patriots owner Robert Kraft and many others last month. Yang posted photos of herself at the event on a website for her consulting business. The business claimed to offer Chinese clients access to Trump, his family and his advisers at Mar-a-Lago and at the White House, among other places.
The presence of both Yang and Danilochkin at the same event illustrates the way that Trump’s private clubs offer a lightly regulated channel into the president’s social circle.
The White House and the Trump Organization did not respond to requests for comment about how Danilochkin gained access to the event. Terry Bomar, the founder and president of the Young Adventurers charity, did not return phone messages. Trump Grau could not be reached.
Thanks to a request from the Russian government, Danilochkin was described as a “wanted person” on the website of Interpol, the international police-cooperation agency that posts red notices on behalf of countries flagging alleged criminals.
Interpol’s red notices are controversial because of their potential for abuse by authoritarian states. U.S. law forbids arrests based on red notices alone; an extradition request is also required.
Danilochkin’s Interpol listing was removed recently, although it’s not clear why. Interpol said it does not comment on specific cases. The Russian Embassy said its police officials were on vacation and could not be interviewed.
Danilochkin remains in the United States.
The ‘Fly-by-Night King’
After Danilochkin fled Russia and the investigation became public, the press took to calling him “the Fly-by-Night King” for his alleged wizardry in setting up easily discarded shell companies.
In South Florida, he became a landlord.
Most wealthy Russians plunking down money into Florida real estate buy multimillion-dollar condos. And Danilochkin does own two of those. But his story is unusual because he also scooped up properties far from the glitzy waterfront. It’s an example of how locals are buffeted by the unseen forces of Miami’s globalized real estate economy.
While Danilochkin declined to comment, court records and property deeds offer an account of his business dealings in South Florida.
When the Russian came to Miami, he had plenty of cash, but no idea what to do with it. He didn’t speak much English. With the recession dragging on, real estate was practically the only game in town.
Between 2010 and 2012, Danilochkin assembled a portfolio of previously foreclosed homes for $1.4 million, and spent another $700,000 on renovations.
Latrice Scott rented a condo from Danilochkin’s company — and said she found her Lauderdale Lakes home crawling with cockroaches.
“It was always infested,” said Scott, who worked at Walmart at the time. “I had to clean out top of the cabinets and behind the refrigerator to get the eggs.”
She said she asked for an exterminator but none came. She and her two young sons eventually left.
Waikiki Reddick, the Homestead woman who rented another Danilochkin property, said in an interview that the three-bedroom unit was falling apart.
The air conditioning broke down and the refrigerator reeked of mold. The kitchen sink backed up. The dishwasher didn’t drain. Danilochkin’s property manager never came out to fix the problems, she said. Eventually, she stopped paying rent and was evicted, along with her three children and her sister.
Danilochkin has suggested in a lawsuit that conditions in the condos were not his fault; he has sued Vadim Nestscheret, the business associate he claims failed to maintain them, as well as related companies and individuals.
Brand new to the country, Danilochkin says he was taken advantage of by Nestscheret, a Russian-born South Florida businessman who after the financial crisis attracted other wealthy Russians to invest in his venture buying foreclosed homes.
In a lawsuit, Danilochkin said Nestscheret and his associates inflated sales prices, embezzled rent and pocketed funds meant for renovations, as well as stealing title to some of his properties. It all amounted to a “racketeering criminal enterprise,” the lawsuit stated.
In court filings, Nestscheret denied all claims of wrongdoing, stating that he “refused to have any further business dealings with Danilochkin” after learning of his alleged crimes in Russia, but that Danilochkin “decided he wanted more” and sued. (Danilochkin says it was he who broke off ties.)
In an emailed statement, Nestscheret’s attorney Robert Pittman said his client “denies these claims against him, which continue to languish in court for months on end with no apparent effort from Danilochkin to resolve these baseless claims.”
Nestscheret, born in Russia but a longtime U.S. resident, declined to comment. He has a long history in South Florida, having once been tangled up in a 2006 civil lawsuit with a Russian professional hockey player that would, by a twist of fate, require Trump’s prison-bound former fixer Michael Cohen to testify that he had no memory of what happened to a $350,000 check given to him by a client.
Danilochkin got his start in business as an executive in Russia’s metals industry, which suffered mob infiltration after the fall of the Soviet Union.
He says he used to work for companies owned by two Russian billionaires who made fortunes in the industry: Oleg Deripaska and Iskander Makhmudov. (Deripaska is a Putin ally and former client of ex-Trump campaign chairman Paul Manafort. He has been sanctioned by the United States and became a flash point in the fight over Trump’s alleged ties to Russia when the administration sought to ease the sanctions and Democrats rebelled, even enlisting some Republicans in their uprising.)
In 2007, Danilochkin left the metals business to start an auditing firm. He dreamed of running a Russian equivalent to the global accounting titan Ernst & Young. But the crime group behind the Magnitsky affair “tried to lure my audit company” into a tax-fraud scheme, Danilochkin said in the documentary he produced.
Danilochkin said he did audit the companies in the middle of the 2009 tax fraud scandal at the request of a businessman in Russia’s metals industry, Andrei Bruevich. Once he realized the companies were claiming giant, fraudulent tax refunds, he tried to quit, he said. But Bruevich was angry.
“He sternly warned me that I didn’t realize who I was dealing with,” Danilochkin said in the documentary. “The job was contracted by very serious people and there was no option for me.”
Danilochkin said he refused to participate in any fraud. That’s when police started harassing him. He claims someone tried to poison him by planting mercury in his office. The heavy metal was discovered only when a heater needed repairs and mercury spilled out.
“I survived,” Danilochkin said in the video, “but fear never left me.”
Soon he decided to leave Russia. (Bruevich was later murdered.)
Last year, the Russian newspaper Novaya Gazeta reported that the criminal ring behind the Magnitsky tax fraud also masterminded the 2009 theft allegedly involving Danilochkin.
If Danilochkin was involved in the elaborate theft, it seems impossible for him to have been solely responsible, the article concluded.
Still, he does appear to have moved in the same circles as the Russian elites believed to have masterminded the series of major tax-fraud cases.
For instance, Dmitry Klyuev, a Russian banker and alleged organized-crime figure named by U.S. prosecutors as being behind the Magnitsky fraud, once shared a chartered private plane with Danilochkin. The plane flew from a Moscow airport to the south of France on March 7, 2009, according to a flight record obtained by the Miami Herald.
Klyuev, the subject of U.S. sanctions for his role in the Magnitsky affair, could not be reached.
In press interviews, Danilochkin dismissed the trip as a coincidence.
“The point is that the entire Russian jet set moves along the same routes: the same gatherings, restaurants and yacht clubs,” Danilochkin told Novaya Gazeta. “I met Klyuev at these places. But this does not suggest that I had business with him or that I was his partner.”
Immigration cases are confidential so the evidence supporting Danilochkin’s claim to stay in the United States is unknown. But his documentary, which focuses heavily on the Magnitsky case, offers a window into his thinking.
The 2007 fraud was uncovered by Sergey Magnitsky, a Russian lawyer working for American-born financier Bill Browder. Magnitsky reported to authorities that Russian police and tax officials had used fraudulent refunds to steal $230 million paid in taxes by Browder’s Moscow private-equity firm, Hermitage Capital Management. Organized-crime groups had laundered the pilfered funds through banks and real estate into the global financial system.
Authorities didn’t act on Magnitsky’s information — at least not the way he intended. Instead, the lawyer was jailed, beaten and tortured before dying in prison in 2009. He was then posthumously tried and convicted for the very fraud he reported. His murder outraged Browder, who would lead a global campaign for sanctions. In 2012, Congress passed an act to sanction Russian officials involved in the case. (A Russian government investigation found Magnitsky had not been mistreated.)
In the years after Magnitsky’s death, Browder also produced a series of investigative videos called “Russian Untouchables.” Danilochkin’s documentary — called “Russian Untouchables: New Victims” — seems modeled on that earlier work and claims to be based on the “expert conclusions” of Browder and others.
Browder, who now lives in London, says he wasn’t involved in Danilochkin’s production.
“Everything in our videos has been fully vetted and verified,” he told the Herald.
The 2012 U.S. sanctions sought by Browder were a huge blow to Russia, and to its relations with the United States. Putin has demanded Browder’s arrest.
Putin and his allies have also worked to overturn the sanctions. In June 2016, during the U.S. presidential campaign, a Russian lawyer promising damaging information on Hillary Clinton scored a meeting in Trump Tower with Donald Trump Jr., Jared Kushner and Paul Manafort. Instead of delivering dirt on Clinton, the lawyer, Natalia Veselnitskaya, gave a lecture on the Magnitsky Act, according to Trump Jr. (The act remains in place.)
Veselnitskaya is also connected to the Magnitsky case and has been indicted for obstruction of justice in the United States. Federal prosecutors say she secretly conspired with the Russian government while defending a company believed to have laundered proceeds from the $230 million theft uncovered by Magnitsky into New York real estate.
Ultimately, Danilochkin fears he could meet a similar fate to Magnitsky’s.
Before he fled Russia in 2010, Danilochkin says, two “thugs” tried to stab him in the elevator of his apartment building. He scared them away by firing a rubber-bullet gun.
“I realized there was no way to survive,” Danilochkin said in the documentary. “I didn’t care that I was slandered and that all the power of the [Russian] law enforcement system was thrown at me by high-ranking criminals. … I was anxious to simply stay alive.”