Russian bank founder sentenced for evading exit tax upon renouncing U.S. citizenship

 

Date: October 29, 2021

Contact: newsroom@ci.irs.gov

OAKLAND — The founder of a Russian bank was sentenced today for his felony conviction of filing a false tax return. As required under his plea agreement, prior to sentencing Oleg Tinkov, aka Oleg Tinkoff, paid $508,936,184, which is more than double the amount he sought to escape paying to the U.S. Treasury through renouncing his U.S. citizenship and concealing from the IRS large stock gains, which he knew were reportable. This payment includes $248,525,339 in taxes, statutory interest on that tax, and a nearly $100 million fraud penalty. Tinkov was additionally fined $250,000, which is the maximum allowed by statute, and sentenced to time served and one year of supervised release. The sentence was handed down by United States District Judge Jon S. Tigar.

Tinkov was indicted in Sept. 2019 for willfully filing false tax returns and was arrested on February 26, 2020, in London, United Kingdom (UK). The United States sought extradition from the UK, and Tinkov contested extradition on medical grounds. In public records, Tinkov has disclosed that he is undergoing a UK-based intensive treatment plan for acute myeloid leukemia and graft versus host disease which has rendered him immunocompromised and unable to safely travel in the foreseeable future.

On October 1, 2021, Tinkov entered a plea to one count of filing a false tax return, a felony. According to the plea agreement, Tinkov was born in Russia and became a naturalized United States citizen in 1996. From that time through 2013, he filed U.S. tax returns. In late 2005 or 2006, Tinkov founded Tinkoff Credit Services (TCS), a Russia-based branchless bank that provides its customers with online financial and banking services. Through a foreign entity, Tinkov indirectly held the majority of TCS shares.

In October 2013, TCS held an initial public offering (IPO) on the London Stock Exchange and became a multi-billion dollar, publicly traded company. As part of going public, Tinkov sold a small portion of his majority shareholder stake for more than $192 million, and his assets following the IPO reached a fair market value of more than $1.1 billion.

Three days after the successful IPO, Tinkov went to the U.S. Embassy in Moscow, Russia, and relinquished his U.S. citizenship.

As part of his expatriation, Tinkov was required to file a U.S. Initial and Annual Expatriation Statement. This form requires expatriates with a net worth of $2 million or more to report the constructive sale of their assets worldwide to the IRS as if those assets were sold on the day before expatriation. The taxpayer is then required to report and pay tax on the gain from any such constructive sale.

Tinkov was told of his filing and tax obligations by both the U.S. Embassy in Moscow and his U.S.-based accountant. When asked by his accountant if his net worth was more than $2 million for purposes of filling out the expatriation form, Tinkov lied and told him he did not have assets above $2 million. When his accountant later inquired whether his net worth was under $2 million, rather than answering the question Tinkov filled out the expatriation form himself and falsely reported that his net worth as only $300,000. On February 26, 2014, Tinkov filed a 2013 individual tax return that falsely reported his income as only $205,317. In addition, Tinkov did not report any of the gain from the constructive sale of his property worth more than $1.1 billion nor did he pay the applicable taxes as required by law. In total, Tinkov caused a tax loss of $248,525,339, and he has now paid that in full with substantial penalties and interest as part of his plea, together with tax liabilities for other years.

Acting U.S. Attorney Stephanie M. Hinds for the Northern District of California, Acting Deputy Assistant Attorney General Stuart M. Goldberg, and Acting Special Agent in Charge Darrell J. Waldon of the IRS-CI Washington, DC Field Office made the announcement.

The IRS-Criminal Investigation Division investigated the case. The Justice Department's Office of International Affairs and law enforcement partners in the UK secured Tinkov's arrest overseas.

Assistant U.S. Attorney Michelle J. Kane, along with Assistant U.S. Attorneys Katherine Lloyd-Lovett and Colin Sampson and former Assistant U.S. Attorney Jose A. Olivera, of the U.S. Attorney's Office for the Northern District of California and Trial Attorney Peter Anthony and former Assistant Chief Yael T. Epstein of the Tax Division prosecuted the case.