New owners of MTS Armenia: who are they?

Daily News America managed to find out the activities of Zhe Zhang and Konstantin Sokolov, the new owners of MTS Armenia, as well as some details of their previous transactions, including the sale of Armbusinessbank.

On January 24, MTS Armenia CJSC, represented in the telecommunication market by the brand “Viva-MTS”, announced about the change of its shareholder. This meant that MTS Armenia is no longer part of the Russian MTS Group. Its new shareholder is the Cyprus-registered company Fedilco Group Limited, whose owners, according to the operator, are European and Asian investors.

“MTS Armenia has named the ultimate beneficiaries-owners of Fedilco Group Limited. They are Zhe Zhang and Konstantin Sokolov, “professional investors with extensive experience in telecommunications, finance, energy and asset management”.

Who are these persons, what do they do and what do they have to do with the sale of “Armbusinessbank”?

It should be reminded that until now MTS Armenia CJSC (in 2004-2017 the company was called K-Telecom) was owned by Russian MTS through a number of companies. Thus, the 100% shareholder of MTS Armenia CJSC was the Cyprus-registered company Aramayo Investments Limited, which in turn is fully owned by Allegretto Holding S.a.r.l., based in Luxembourg offshore. The latter is a subsidiary of the Russian public joint-stock company Mobile TeleSystems. At the same time, 42.085% of MTS shares belong to the public joint-stock company Sistema Joint-Stock Financial Corporation, whose largest shareholder (49.2%) is Russian billionaire entrepreneur Vladimir Evtushenkov.

This is the scheme presented by MTS Armenia in the declaration of real beneficiaries approved on March 2, 2023, which was placed in the RA State Register of Legal Entities.

Why did the state reject the MTS Armenia transfer deal in April 2023?

In January 2023, MTS Armenia CJSC applied to the Public Services Regulatory Commission (PSRC) for consent to conclude a deal to transfer control of the company. It was envisaged that Allegretto Holding S.a.r.l., owned by the Russian MTS and registered in Luxembourg, would alienate 100% of the shares of its Cypriot company Aramayo Investments Limited (the direct owner of MTS Armenia) to Fedilco Group Limited operating in Cyprus.

The PSRC appealed to the Ministry of High-Tech Industry, which reviewed the issue with the National Security Service, after which it filed objections to the transaction. On April 12, the PSRC, based on the objection of the Ministry of HTP, decided not to consent to the transaction. The denial was justified as follows: “Approval of the transaction may be refused if the documents and (or) information submitted for consent do not meet the requirements of the procedure established by the CRTC, as well as if, according to the assessment of the competent authority (the Ministry of WTP - Daily News America ), they are or may be detrimental to national security or state interests.” It could not be understood from this explanation what could have harmed the national security or state interests of RA if the owner of MTS Armenia “Aramayo Investments Limited” was alienated by “Fedilco Group Limited”.

According to the source of Daily News America , the reason for the refusal to conclude the transaction by the state authorities was the fact that the real beneficiary of the transaction was not identified, i.e. the real owner of the buyer company from Cyprus, which was fraught with risks from the point of view of security.

Who is the founder of Fedilco Group Limited "on paper"?

And who was the official owner of “Fedilco Group Limited”, if the RA state structures saw the risks and rejected the deal?

According to the official registry files of Cyprus, it was a citizen of this country, who, however, was not distinguished by his financial capabilities.

Thus, “Fedilco Group Limited” was established in April 2022, nine months before the above-mentioned application was submitted to the CRTC. Manolis Tarchanidis was the sole owner as well as director of the company. According to his Facebook page, this 50-year-old Cypriot citizen is from the Russian city of Norilsk and, as evidenced by the content of his social media pages (see here and here), he has a pro-Russian stance in the current geopolitical situation.

Tarhanidis, who sells cars through the social networking site Facebook, surely could not have had such financial means to acquire MTS Armenia CJSC, which is one of the largest taxpayers in the country. It should be added that Tarhanidis has held and still holds positions of director or secretary in other Cypriot companies.

The secretary of Fedilco Group Limited from its inception until the beginning of 2023 was the Cypriot company GIF Capital Limited. According to its website, its staff consists of highly qualified concession managers, tax advisors, lawyers and accountants with extensive knowledge in the areas of international tax planning, protection and concession asset management. From February 2023 to date, the secretary of Fedilco Group Limited is GIF Management Limited, a subsidiary of GIF Capital Limited. Logic suggests that Manolis Tarhanidis was the fictitious owner of “Fedilco Group Limited”, and it appears that it is “GIF Capital Limited” that performs the main functions of this company.

After the Public Services Regulatory Commission rejected the application of MTS Armenia in April 2023 and Fedilco Group Limited failed to become its indirect owner, changes took place in the Cypriot company.

In July 2023, Manolis Tarhanidis transferred the shares in Nofal and Ortasano registered in his name to another Cypriot company, Wimthed Limited, which had been established the year before. “Wimthed also became a director of Nofal and Ortasano, succeeding Tarhanidis.

The owner of “Wimthed Limited” from the day of its foundation to this day is a Cypriot citizen Andreas Ourris, who also holds the positions of director and secretary of the company. In these two capacities, Mr. Ourris is a participant in many Cypriot companies that are affiliated with “GIF Capital Limited”. Moreover, his wife Marharyta Ourri is an employee of GIF Capital. M. Ourri's maiden name is Romanova and she comes from the Ukrainian city of Kherson. Marharyta Ourri, like her husband, holds senior positions in various Cypriot companies. All this suggests that Andreas Oourris, like Tarhanidis, is playing a fictitious role.

Thus, “Fedilco Group Limited”, its owner company “Nofal Holdings Limited”, “Ortasano Investments Limited” and the shareholder of these companies “Wimthed Limited” were established in April-July 2022. The owners of the companies were registered persons (M. Tarhanidis, A. Oourris) affiliated to the business services company “GIF Capital Limited”. This means that through these companies the real beneficiaries-owners behind them were hidden.

And the problem is that in November 2022 the European Court of Justice, which is the highest body of the EU judicial system, blocked access to the data of real/ultimate beneficial owners registered in EU countries (UBO, ultimate beneficial owner). In other words, official information on the real owners of the above-mentioned companies based in the EU member state of Cyprus is confidential.

What changed in the fall of 2023? NSC did not see the risks

So, in October 2023, Manolis Tarhanidis transferred 75% of “Fedilco Group Limited” to “Nofal Holdings Limited” and 25% to “Ortasano Investments Limited”. The latter are officially owned by “Wimthed Limited”, which in turn is owned by Andeas Ourris.

A few days later, in early November, MTS Armenia CJSC again applied to the Public Services Regulatory Commission to get approval for the purchase of MTS Armenia CJSC - this time by Fedilco Group Limited. That is, Fedilco was to become a direct shareholder of MTS Armenia, and not the owner of the Armenian company, Aramayo Investments Limited. On November 15, a few days after the application was submitted, the PSRC gave its consent to conclude the deal. This time, the Ministry of High-Tech Industry did not raise any objections, reporting also that there were no comments from the National Security Service. In other words, this time the NSS did not see any risks related to national security or state interests.

When asked what changed after April, if the NSC had no objections, Armen Unanyan, the representative of the PSRC, the rapporteur on the draft decision on the consent to the transaction, replied that although the buyer is still the same company “Fedilco”, there is a difference with the previous application. Unanyan apparently meant that the buyer immediately becomes a shareholder of MTS Armenia, which, however, does not clarify the situation. On the other hand, Unanyan noted: “As for the position of the NSC, the authorized body is not the Commission, so we cannot explain instead of the NSC on the basis of what criteria such an assessment was made.”

On November 15, the PSRC also made a decision that Fedilco and the Russian party that owns MTS Armenia conclude an agreement within six months and submit it to the Commission. The agreement was concluded and, as it followed from the RA state register, on January 26 of this year, by the decision of the extraordinary general meeting of MTS Armenia CJSC, an amendment was made to the charter, according to which from now on all the shares of the CJSC belong to Fedilco Group Limited. It is noteworthy that although the Armenian company is no longer a member of the Russian MTS Group, it still retains the name “MTS Armenia”.

In any case, what changed in November compared to April? The answer to this question was given to Daily News America  by our source.

So, the Armenian operator announced only on January 24 this year that the beneficiary-owners of “Fedilco Group Limited” are Zhe Zhang and Konstantin Sokolov. However, last November a source of Daily News America  reported that during the transaction the real owners were Dr. Zhe Zhang and K. Sokolov: Zhang is the owner of “Nofal Holdings Limited”, which owns 75% of “Fedilco”, and Sokolov is the owner of “Ortasano Investments Limited”, which owns 25% of the same “Fedilco”. That is, if in the spring of 2023 the competent RA authorities did not know the real beneficiaries of the transaction (of course, it was not Manolis Tarhanidis), now two people have appeared.

However, according to our source, this is how the situation was presented to the Armenian authorities. Zhang and Sokolov indicated their family trusts (assets transferred to concession management) as the source of financial resources envisaged for the transaction, the origin, details of activities, nature of which, as well as other necessary information, were not disclosed.

After the failure of the first deal, MTS wanted to become the direct owner of MTS Armenia

When in April 2023 the Public Services Regulatory Commission did not agree to a replacement in the shareholder chain of MTS Armenia, the Armenian operator again applied to the PSRC on August 29, informing that the Russian MTS Group wanted to acquire 100% of the shares of MTS Armenia from the Cypriot company Aramayo Investments Limited. In other words, the Russian parent company was to become the owner of the Armenian CJSC not through Aramayo and Allegretto registered in Luxembourg, but directly.

It was in August that CRCU applied to the Ministry of High-Tech Industry, which, however, responded only at the end of October. Apparently, the reason was the situation in Artsakh and the forced resettlement of Artsakh Armenians in September-October. MTS Armenia was asked for additional clarifications, which were submitted in November, after MTS Armenia had already reapplied to the CRTC to conclude the deal with Fedilco. The Ministry of WTP presented its position in December, when Fedilco had already been given the green light. Given this, the ministry opposed MTS becoming the direct owner of the Armenian subsidiary. On this basis, the CRTC rejected the application on January 17.

Who is Dr. Zhe Zhang?

The 50-year-old Chinese Zhe Zhang, according to his LinkedIn page, is a lawyer by profession and graduated from Peking and Oxford Universities and the University of International Business and Economics in Beijing with a doctorate in law.

Marketscreener.com associates Zhang's name with educational and entrepreneurial organizations operating in various countries around the world - in China, including Hong Kong, the United States, Canada, and the United Kingdom. According to the same source, the Chinese entrepreneur currently holds various executive positions in American, British and Hong Kong companies. In particular, he is a director of seven British companies, of which KX Power Limited, which is engaged in asset management, development and investment in the fields of renewable energy and power generation, can be highlighted. Zhang is the chief executive officer of “KXP” (CEO). And in British companies Zhang's country of residence is indicated as Great Britain. Among Zhang's companies one should pay attention to SIFT Capital Partners Limited, founded in Hong Kong and specializing in onshore and offshore asset management. Zhe Zhang is the founder and CEO of this company. “SIFT Capital“ has branches in many countries, including Cyprus (”SIFT Capital Partners Cyprus Ltd"). It will probably not seem strange that the director of this company is the above-mentioned Andreas Ourris, and the secretary is GIF Management Limited.

But what is much more interesting is that SIFT Capital Partners was involved in the management of the new foreign owner of the former “Armbusinessbank”, renamed AMIO Bank. Not only that, as the Daily News America  source notes, Zhe Zhang and his partner Konstantin Sokolov are involved in the process of buying “Armbusinessbank”.

What do Zhang and Sokolov have to do with the sale and management of Armbusinessbank?

Armbusinessbank” CJSC, owned by entrepreneur Vitaly Grigoryants, was sold to Swiss company ‘MFM Global Invest AG’ in December 2021. In January 2022, the Refinancing Credit Organization “Housing for Youth” became the owner of 25% of the bank. The Swiss party remained the owner of 75%.

Some time after the conclusion of the deal, Alfred Moeckli, the chairman of the Armenian bank's board, a Swiss, stated that the owner of “MFM Global Invest” is an investment fund operating in Liechtenstein. Despite the fact that Moeckli did not announce the name of the fund, and the Swiss register does not specify the data of the owners, the source told Daily News America  that it is Halcon Innovation Fund. This is one of the five sub-funds of the Halcon Investment SICAV registered in Liechtenstein. Currently, the parent fund manager is ONE Funds AG (Liechtenstein), but the management of two of the five sub-funds is delegated to another company registered in Hong Kong.

And, as it turned out, the management of three sub-funds of Halcon Investment SICAV, including Halcon Innovation Fund, which is an indirect owner of 75% of Armbusinessbank, was delegated to Zhe Zhang's Hong Kong-based company SIFT Capital Partners Limited until March 2023 (see the document below from Halcon Investment SICAV's 2022 report, when this parent fund was managed by Liechtenstein-registered BENDURA Funds AG).

This means that the company of a Chinese businessman specializing in asset management indirectly managed 75% of “Armbusinessbank” shares.

As for Zhang's partner Konstantin Sokolov, according to our source, he acted as a representative of the consultant of the foreign companies-owners of “Armbusinessbank” (see top picture). According to the source, Zhang and Sokolov specialize in company purchase transactions, where they organize negotiations, agree on the details of the transaction and in this respect represent the real beneficiaries (i.e. they are not the owner-beneficiaries themselves), conclude transactions, submit documents to the relevant state bodies, etc.

Our studies also allow us to conclude that Zhe Zhang and K. Sokolov are only managers, functionaries who work for the owners who remain in the shadows.

Daily News America  has also found out a number of facts about Sokolov, about some companies affiliated with him and his previous transactions, in which there are questionable episodes. But we will talk about this in the next article.