Panama Papers: First US Criminal Prosecution, Chetan Kapur

On 9/7/16 Federal Judge Paul Engelmayer ruled that Chetan Kapur, an Indian-born NY investment manager, the only US taxpayer to be prosecuted in connection with the Panama Papers, must remain in jail (he has been in jail since 7/15) until the next case hearing (10/28/16).

Kapur was jailed on contempt charges for refusing to cooperate with a court order to turn over evidence related to secret offshore bank accounts contained in his Google e-mail account and his missing cell phones (used for e-mails). The SEC advised the court that the secret bank accounts were used by Chetan Kapur and his nominee (his brother Kabir Kapur) in Swiss banks (Bank Vontobel and Bank J. Safra Sarasin) to hide $4.3m in assets.

Leaked documents from the Panama Papers (internal documents from Panamian Law Firm, Mossack Fonseca) showed that Chelan Kapur transferred ownership of assets to his brother, Kabir, in 2012 after US legal authorities brought criminal charges against Chetan Kapur.

Kapur’s jailing for contempt involved failing to make restitution to investors in a civil settlement he reached with the SEC in 2011 (as owner and operator of Think Strategy Capital Management). Kapur, who was brought to court “shackled and chained”, claims he can’t make restitution because he lost money alongside his investors. The Federal Court Judge in New York took the position that Kapur still controlled the offshore assets, which he and his brother moved funds back and forth from Switzerland through offshore companies in 3 separate bank accounts held at the Swiss banks.

Swiss authorities have frozen the Kapur brothers accounts. The funds may be repatriated to the US and distributed as directed by the Federal Court Judge in New York if Kapur gives his consent. Once Kapur consents the freeze may be lifted and the funds delivered to the SEC and US regulators on behalf of Kapur’s investors. To date, Kapur has refused to give consent and remains jailed.

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