Bulgarian Coal Magnate’s Plants May Have Saved Around 30M Euros by Under-Declaring Emissions
OCCRP analysis shows two power stations associated with Hristo Kovachki have reported strangely low emissions figures for the past three years.
The small island of Malta is home to almost 300 invisible casinos. If each had a bricks-and-mortar presence, the country would be knee-deep in gamblers. But it’s not. There are just four physical gaming establishments, and fewer visible bookmakers than in Italy or Spain.
The others are remote gaming companies that are based in Malta but serve clients far afield. The industry took off here after 2004, when the government, led by then-Prime Minister Lawrence Gonzi of the Nationalist Party, introduced the first online gaming regulations in the European Union (EU).
The decision quickly paid off. Today, Malta hosts one of the highest concentrations of online gaming license-holders in the EU, and the industry now rakes in €1.2 billion (US$ 1.4 billion) in annual earnings on the island, making up 12 percent of Malta’s GDP. The hundreds of gaming companies were lured in by the country’s low-tax regime and by the opportunity to obtain operating licenses that allow them to conduct business across the EU’s 28 member states. But Malta’s capacity to effectively police this industry has since become a source of worry for law enforcement across Europe.
This explosive growth of online gambling was of great interest to Maltese journalist Daphne Caruana Galizia before she was killed by a car bomb last October. The Daphne Project, a consortium of 18 news organizations from 15 countries, including the Investigative Reporting Project Italy (IRPI), a partner of the Organized Crime and Corruption Reporting Project (OCCRP), has been working for the past five months to complete Caruana Galizia’s work.
In following up on her interest in online gambling, reporters have pieced together a disturbing picture.
The industry’s success has come at a high price. For the past decade, Italian investigators have been looking into how various mafia organizations have exploited Maltese online gaming to make and launder large amounts of money. They found repeated instances of criminal infiltration and a lack of effective oversight by the Malta Gaming Authority (MGA), which regulates the industry. The latest anti-mafia operations also reveal how the lucrative Maltese online gaming licenses change hands from one criminal group to another.
Maltese-registered operators are allowed to set up betting shops in any EU country, as long as the computer terminals are linked to servers in Malta. In theory, there are safeguards to prevent abuses: They are only supposed to provide access to websites where customers log into their own accounts, using their own funds, and play games directly.
In practice, when controlled by organized crime, online gaming systems can essentially function as ATMs for criminals. This is the conclusion reached by anti-mafia prosecutors in Palermo, the capital of Sicily, who in February 2018 cracked down on a vast Maltese gambling network allegedly linked to families belonging to the Cosa Nostra, Sicily’s infamous mafia organization.
“The interest of Cosa Nostra in online gambling started in about 2013-2014,” Sergio Macaluso, a Cosa Nostra affiliate turned police informant after his November 2017 arrest, told investigators. “They infiltrated the sector by making deals with the owners of betting websites, many of whom are set up in Malta because it guarantees a more favorable tax regime.”
In Malta, IRPI discovered that online gambling businesses continue to operate even after their licenses have been suspended. In at least one case, they have been assisted by a “fiduciary” (a legal entity which manages assets on another’s behalf) created by a former MGA official, one of a number of such organizations which help criminals obtain licenses and hide behind secretive corporations.
In its quest to become the gambling hub of Europe, Daphne Caruana Galizia wrote, Malta left the doors open to abuse.
A hundred kilometers of water separates Valletta, Malta’s seaside capital, and Pozzallo, a town on Sicily’s southern tip. The town is frequently in the headlines as a port of arrival for migrant boats, but it is also the point of departure for ferries bound to Malta.
In early April 2015, Vincenzo Romeo boarded one of those ferries. Romeo is the nephew of Nitto Santapaola, a Cosa Nostra boss. The clan under his leadership, the Santapaola, rules the island’s Catania province.
Described by Italian investigators as a rising star of the Sicilian Mafia, Romeo is the poster child for a new breed of mobsters: educated, cosmopolitan and eager for new business opportunities. Romeo knew that he could make millions with online gambling, but his family’s criminal past meant that he would never get clearance from the Italian authorities. That, investigators say, is why he headed to Malta — with €38,000 in cash.
His contact on the island was Massimo ‘Nunzio’ Lagana, an old acquaintance who, like Romeo, hailed from the Sicilian city of Messina. In Italy, Lagana was known for his checkered past: He had featured in criminal investigations into illegal gambling and Mafia ties since the mid-2000s. But in Malta, he represents himself as a successful gaming impresario. He collaborated with Planetwin365, one of the island’s largest online operators, to organize live poker tournaments at the Portomaso Casino in the exclusive Saint Julian’s Bay area.
Thanks to his high profile, Lagana became well-connected in the local gaming sector. According to an Italian arrest warrant seen by IRPI, he was able to hunt down developers who could create an online casino that would meet all of Romeo’s requirements.
From conversations wiretapped by Italian police, it emerged that a Slovenian man based in Malta was the technical mastermind of the operation. At Lagana’s request — and with the €38,000 in compensation — he allegedly created a series of online gambling platforms and licensed them to Romeo, who then installed them on computer terminals in betting shops and bars across Sicily.
Typically, online gambling operates by linking players’ accounts to their credit cards or to online payment systems like Emoney or Skrill. These transactions are, in theory, traceable by regulators. But in Italy, most players go in person to betting shops and place their bets — and collect their winnings — in cash. This is illegal without the proper license from Italian authorities, but it is widely tolerated. And it opens up a world of possibilities that Romeo — among other operators — was keen to exploit.
Investigators in such cases say that, rather than letting their customers log in with personal online gambling accounts, betting shop proprietors would set up a single account for all their customers to use. The cash generated when players placed bets was pooled in the shop’s account, making it impossible to trace individual bets.
According to sources from the illegal gambling industry, once a month, someone working for the mafia clans would come by and pick up their share of the cash from the Italian betting shop. Most of the money would then be laundered through banks in Italy and elsewhere, while a portion would be sent to Malta to pay middlemen to keep the operation going.
In other cases, mobsters used methods that were harder to trace: loading the cash into a random player’s online account in Italy, and then pulling it out in another country; or, for very large sums, employing a fiduciary to pick up the cash and transport it to safe accounts in Switzerland, Malta, or other locations.
These widely used systems help the criminal organizations evade Italian regulators, who struggle to block their spread and to recoup tax payments.
Another advantage of the setup is that it allows mobsters to add streams of cash from their other operations — like drug smuggling or extortion — to the gambling proceeds as needed, allowing these funds, too, to be laundered.
In July 2017, Romeo and Lagana were arrested in the Sicilian city of Messina on charges of mafia-type association and illegal gambling as part of a vast anti-mafia probe. A lawyer for Massimo Lagana told reporters that his client “has nothing to do with the crimes alleged by prosecutors” and that he will prove his innocence in court.
Unscathed by the investigation, the Slovenian creator of the websites continues his operations in Malta, running an operation licensed by the MGA that develops gaming websites.
Romeo and Lagana’s case illustrates how the Italian mafia has been able to gain control over Italy’s gambling sector using Malta as the gateway. And it’s not an isolated one.
Another example is the case of Benedetto Bacchi, known in the Italian press as the “king of gambling.”
On Jan. 26, 2018, the Court of Palermo issued 26 arrest warrants in an operation called Game Over. The investigation revealed the extent of the ties between Italian organized crime and Malta’s gaming industry — in line with Daphne Caruana Galizia’s suspicions.
Among those arrested was Bacchi. He was accused of conspiring with mobsters from Palermo to rid the city of all competition to his gambling business. With the support of gambling brokers linked with the ‘Ndrangheta — the infamous Calabrian mafia — he was able to use Maltese gaming licenses to grow his profits to €16 million a month.
In describing Bacchi’s operation, the Palermo prosecutor spoke of online gambling as an “ATM with a continuous cash flow” that allowed for “cash to be withdrawn for the needs of the [Mafia] clans.”
Over the following months, Malta’s MGA began to suspend the licenses of gaming operations mentioned in the Game Over indictment and promised a wide-ranging investigation into all license holders with connections to Italy. A source in the Maltese gaming industry who wanted to remain anonymous to avoid professional and legal repercussions told reporters that multiple gaming companies confronted the agency, threatening to leave the island unless it cleaned up the industry.
The operation appeared, at least initially, to lead to serious consequences in Malta. The MGA immediately suspended the operating license of the main operator named in the Game Over investigation, and a week later announced its own investigation.
A few weeks after that, three Maltese operators voluntarily gave up their licenses rather than face further scrutiny. Another company mentioned in the Italian investigation, LB Group, had its licenses cancelled.
The MGA refused to say whether any alleged criminal links were behind its decision to cancel LB Group’s license. However, court records seen by reporters show that the company operated in Palermo through a man nicknamed “Jonathan” who was supported by the Partinico and the Resuttana mafia families — members of the Palermo-based Cosa Nostra — enabling him to promote the brand in the area.
Court records allege that LB Group was managed by an even more powerful Cosa Nostra branch from Mazara del Vallo, a nearby city controlled by Matteo Messina Denaro — the boss of all Cosa Nostra bosses.
Denaro has been on the run since 1993, and it may have been online gaming money that financed his life in hiding. At least that’s what investigators allege after arresting over twenty of his relatives and associates last month.
Among Denaro’s arrested associates was betting manager Carlo Cattaneo. According to prosecutors, Cattaneo established dozens of gambling centers on the Western coast of Sicily thanks to his close business ties with leading Cosa Nostra figures. Cattaneo seemed to be playing a double game common to the industry. Officially, his agencies operated under the banner of Betaland — a brand based in Malta, but also licensed by the Italian authorities. However, under the counter, they encouraged clients to gamble on a more lucrative unregulated Maltese site: Bet17Nero.
This platform was not authorized, but a cunning trick allowed Cattaneo to avoid suspicion. Developers tweaked the interface of Betaland, the legitimate website, by inserting a small invisible banner. By clicking on the banner, players could get access to Bet17Nero.
Players are keen to gamble on such sites for a simple reason: They can get higher winnings for the same bets than on authorized sites. This is because foreign sites unregulated by Italian authorities can offer much better odds, since they are essentially evading taxes in the country.
Bet17Nero appears to have been operating out of Malta. Domain registration data links the site to LB Group Ltd, the Maltese company that had its license suspended.
Now, over a month since the suspension of LB Group’s license, the measure appears toothless.
The company is still working out of its state-of-the art base in Malta’s gambling district of Gzira. Its flagship brand, Leaderbet, still accepts bets in dozens of agencies located across Italy, while other platforms similar to Bet17Nero (see box) are active online. Reporters paid a visit to Gzira, and requested that LB’s managers call back for an interview. They never did.
How exactly Leaderbet continues to function is the stuff of mystery, which hints at a degree of lawlessness in online gaming. The company told reporters that “it never interrupted its activities because it had already acquired a further license.”
Until today, the bookmaker’s website indicates that it was now operating under a license granted by the Austrian state of Carinthia to an Austrian company called Tipexbet.
But that changed after reporters contacted Tipexbet.
In a statement, the company denied having authorized Leaderbet to use its license and claimed to have now discovered the ‘theft’ of the license. “They used our licence with no authorisation for over a month. We have now (Thursday 10 of May) managed to remove our licences from their website.”
“We have already informed our lawyers and will ask for damages to Leaderbet,” Tipexbet said.
As a result, Leaderbet is currently operating without a valid license. Asked to comment on this latest development, LB Group has not replied as of publication.
In an earlier statement sent to reporters, LB Group said: “The Malta Gaming Authority decided to revoke unilaterally a series of gaming license, include Leaderbet’s, despite there being no involvement of the company in the judicial proceedings pending in Italy.”
The company’s statement then referred to “Jonathan” and Carlo Cattaneo as “ordinary clients with normal contracts who operated with LB Group for a very limited period of time.”
However, one question remained unanswered: who actually owns LB Group. Much like other gambling operators based in Malta, its ownership structures are opaque. Its shares are owned by a Maltese firm which until 2016 was ultimately controlled by a trust, GVM Holdings. This, it turns out, is partly owned by David Gonzi, the son of former Maltese Prime Minister Lawrence Gonzi — who, in 2004, made Malta the gaming hub of Europe.
Gonzi’s stake in the trust does not mean that he owned LB Group; rather it indicates that he was part of a scheme that held the company on behalf of its mysterious real owner. He’s been investigated for similar arrangements before. In 2015, prosecutors in Reggio Calabria looked into his fiduciary role in companies linked to Mario Gennaro, a bookmaker with ties to Calabrian Mafia families. But no evidence of wrongdoing was found and Gonzi was removed from the list of suspects.
David Gonzi told reporters that he had “never met, spoke to, or communicated with Mr Mario Gennaro” and that “as from December 2015, GVM has been winding down its activities.”
Gennaro told prosecutors that such fiduciaries were highly popular among foreign gaming companies seeking to hide their ownership.
In theory, the MGA’s due diligence process is designed to determine who the ultimate beneficiaries of its licensees are. But, as the agency’s spokesperson told reporters, “there are structures that make it harder for the MGA to detect and identify the true beneficial ownership, especially when structures are offshore and the applicants provide partial or misleading information.”
If fiduciaries aren’t enough, some former MGA officials are willing to lend a hand registering gaming companies in Malta. Anthony ‘Tony’ Axisa, a Maltese lawyer, is one of the pioneers of online gambling on the island.
Axisa knows his stuff: Before becoming a sought-after private consultant in 2006, he was a senior MGA official, and is keen to advertise that fact on his website. Reporters found at least three more cases of former MGA officials working as consultants in the online gaming sector.
Axisa played a senior role in the MGA, acting as its enforcement director. Most importantly, he co-wrote the national online gambling regulations introduced under Gonzi. Axisa’s deep knowledge and connections are now at the disposal of his many clients.
Among them was Bet1128, an online gaming brand which, according to Italian investigators, has deep ties to organized crime in southern Italy. Axisa did not reply to repeated requests for comment.
Secretly owned by Francesco Martiradonna, the son of a convicted mafioso, Bet1128 has also been accused by Italian prosecutors of cutting deals with a powerful ‘Ndrangheta clan to control the gambling market in Crotone, Calabria.
Bet1128 ceased to operate in May 2017, when Martiradonna was arrested in Italy on charges of mafia-type association. But at the height of its success, it was used in hundreds of betting shops across Italy, Romania, and Spain, turning over around €20 million a year.
Originally operating out of the United Kingdom, according to media sources, Bet1128 relocated to Malta in 2009, when its British license was revoked in the aftermath of an Italian anti-Mafia probe.
Its new controlling company, Centurionbet, quickly obtained gaming licenses from the MGA, despite the money laundering charges pending in the Italian courts and a murky corporate structure that hid its real owner, which Calabrian prosecutors believe to be Martiradonna.
Centurionbet’s directors were listed as Axisa and an Italian computer technician; its owners as shell companies registered in the British Virgin Islands and the Seychelles.
Formally, Centurionbet had no affiliation with Martiradonna, but wiretapped conversations recorded by the Italian Fiscal Police and reviewed by IRPI show that he was pulling the strings of its operations from behind the scenes. Martiradonna travelled across Italy, and as far as Argentina and Brazil, to negotiate lucrative deals to expand the network’s power.
Italian prosecutors allege that one such agreement was reached with the Arenas, a ‘Ndrangheta family from the east coast of Calabria. According to police records, the clan’s boss, Pasquale Arena, imposed the Maltese brand in his area, often through intimidation and threats, in exchange for a large share of the gaming revenues.
It was a relationship with mutual benefits: Martiradonna provided a platform and technical expertise and Arena matched it with the criminal muscle to deter any competition.
In part thanks to such clandestine deals, Centurionbet’s success continued until May 2017, when the police probe brought it to a sudden halt. A month after Martiradonna’s arrest, the MGA suspended all of the company’s gaming licenses.
Francesco Martiradonna maintains his innocence and, his lawyer told reporters, is determined to “clarify his position through the judicial proceedings.” A trial against him, and over hundred other people, is expected to start next month in Catanzaro.
The MGA’s suspension of Centurionbet’s online platforms halted its operations, but it was not a law enforcement action — the company’s assets remained active. Fearing that the company’s owners could still regroup, the Italian court immediately sent the office of Malta’s attorney general an official request to seize the company.
The request was urgent, given “the risk, once the evidence is made public, that the assets can be transferred or hidden from possible confiscation,” as a document seen by IRPI stated.
But weeks went by and the Maltese authorities took no action.
The lack of cooperation so angered the Italians that last summer Nicola Gratteri, the chief anti-mafia prosecutor in Catanzaro, who led the Martiradonna investigation, voiced his frustration publicly. “It is easier to work with Peru or Colombia than with Malta,” he said. “If Malta decides not to collaborate or replies six months or a year later, the investigation is useless.”
In January 2018, the Italian court submitted a new request for seizure.
But it wasn’t until reporters contacted Maltese authorities for comment that Malta’s Attorney General, Peter Grech, informed his Italian counterparts that the seizure had been carried out. As of publication, no formal evidence has been given to Italian police that the seizure had taken place.
It is likely that, even if the seizure order was enacted, investigators would have come up empty.
On March 27 of this year, the receptionist for the Maltese owner of the office space once occupied by the firm told reporters that “last December, Centurionbet packed up and left in a rush.”
And yet sitting in the same office, in a glass box at the end of a 50-square-meter room, is an Italian man who has never left. A former operation manager for the company’s Bet1128 brand, he is now the Chief Operating Officer of Ivy Net Ltd., a company that offers “cryptopayment solutions.”
Four computer screens display a cascade of numbers: tokens, or virtual coins. A banner on the screens exhorts visitors: “Just e-Merge, E-merging Solutions for the Blockchain Economy.”
A representative for Ivy Net told reporters that “no connection between Centurionbet and Ivynet exists” and that its COO was chosen because he is a “trustworthy and honest professional competent for that role.”
According to local media accounts, the Maltese government is pushing to become the capital of cryptocurrencies. Having recently branded them “the future of money,” Prime Minister Joseph Muscat is moving ahead with plans to introduce the first virtual currency regulatory framework in the world. Though no regulations are yet in place, by one account, the country already “accounts for the largest share of cryptocurrency trading in the world.”
While many countries maintain a safe distance from a still uncertain sector, Muscat appears eager to gamble. “[It is like] going into uncharted waters, where we don’t have a map to work with, but we will walk, learn, and be in front,” he said last month. “Although we may have problems along the way, we will be pioneers in the world doing this. Our direction is clear.”
A draft cryptocurrency regulation bill is currently under discussion. Once approved, the virtual economy would fall under the remit of the Malta Financial Services Authority (MFSA), the country’s financial regulator. The task of turning the island into a hub for the booming industry will fall to its newly-announced CEO, Joseph Cuschieri, formerly the executive chairman of the MGA.
Cuschieri is widely expected to replicate the success of online gaming in Malta, according to local media.