In re VTB Capital plc

 
UNITED STATES OF AMERICA 
Before the 
SECURITIES AND EXCHANGE COMMISSION 
 
SECURITIES ACT OF 1933  
Release No. 11000 / October 19, 2021 
ADMINISTRATIVE PROCEEDING  
File No. 3-20628 
In the Matter of 
VTB Capital plc 
Respondent. 
ORDER INSTITUTING CEASE-AND-DESIST 
PROCEEDINGS PURSUANT TO SECTION 8A OF 
THE SECURITIES ACT OF 1933, MAKING 
FINDINGS, AND IMPOSING A CEASE-AND-
DESIST ORDER 
 
I. 
The Securities and Exchange Commission (“Commission”) deems it appropriate that 
cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the 
Securities Act of 1933 (“Securities Act”), against VTB Capital plc (“VTB” or “Respondent”). 
II. 
In anticipation of the institution of these proceedings, Respondent has submitted an Offer 
of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the 
purpose of these proceedings and any other proceedings brought by or on behalf of the 
Commission, or to which the Commission is a party, and without admitting or denying the 
findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these 
proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 
Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making 
Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 
  

  
 
 III.  
On the basis of this Order and Respondent’s Offer, the Commission finds
1
 that: 
Summary  
1. This matter concerns material omissions and misleading statements in a 2016 bond 
offering for which VTB Capital Plc (“VTB”), a London-based investment bank, acted with Credit 
Suisse Group AG (“Credit Suisse”) as joint-lead manager.  The bond offering allowed investors from 
a prior 2013 bond offering to exchange their loan participation notes (“LPNs”) for a direct sovereign 
bond issued by the Republic of Mozambique (“Exchange Offer”).  Credit Suisse structured the 
bonds, while both banks prepared and distributed the offering materials.  The offering materials 
provided to the Exchange Offer investors by VTB failed to disclose VTB’s conflict of interest—that 
the bank was a major creditor under two prior financing arrangements with Mozambican state-owned 
entities with interests adverse, in certain respects, to noteholders. The offering materials also failed to 
disclose the full nature of Mozambique’s indebtedness and, relatedly, its risk of default on the notes.   
2. VTB and Credit Suisse participated in three interconnected transactions that preceded 
the Exchange Offer, including: (1) a 2013 $622 million syndicated loan to a Mozambican state-
owned entity known as Proindicus S.A of which VTB provided $118 million in financing; (2) a 2013 
$850 million offering of interest-bearing LPNs to finance debt offered to a second Mozambican 
state-owned entity known as Empresa Mocambicana de Atum S.A. (“EMATUM”), of which VTB 
arranged $350 million in financing; and, without Credit Suisse, (3) a 2014 $535 million syndicated 
loan to a third Mozambican state-owned entity known as Mozambique Asset Management 
(“MAM”), of which VTB provided $435 million in financing. The then-Minister of Finance signed a 
guarantee on behalf of Mozambique for each of these transactions. Mozambique has since disputed 
the validity of the guarantees. 
3. By 2016, after VTB and Credit Suisse learned that EMATUM faced a serious risk of 
default on its first amortization payment to investors, VTB and Credit Suisse structured the Exchange 
Offer to allow investors to exchange the prior LPNs for new sovereign bonds issued directly by the 
government of Mozambique. Acting with Credit Suisse, VTB was integrally involved in the 
disclosures that were required to be made by the Republic of Mozambique as issuer, including 
Mozambique’s guaranteed debt. The debt figure in the prospectus was materially misleading because 
the prospectus failed to accurately disclose the full nature of Mozambique’s indebtedness which, as 
VTB knew, included the over $500 million in financing that VTB provided in the Proindicus and 
MAM transactions and over $500 million in financing that Credit Suisse had provided. VTB also 
failed to disclose to investors the existence of the Proindicus and MAM transactions, including 
VTB’s status as a creditor with rights to obtain interest payments ahead of investors from these prior 
undisclosed transactions. As a result, investors in the Exchange Offer were misled regarding material 
information such as the true nature of the country’s debt, the high risk of default of the bond and that 
VTB had placed its own interests as a creditor above bondholders.   
                                                   
1
 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other 
person or entity in this or any other proceeding.
 

  
 
4. In April 2016, shortly after investors approved the Exchange Offer and after news 
reports on “secret” debt, Mozambique disclosed the Proindicus and MAM transactions and the true 
nature of its guaranteed debt. Simultaneously, the International Monetary Fund (“IMF”) disclosed 
that since at least 2013, Mozambique had misrepresented its public and publicly-guaranteed 
indebtedness to the IMF.  The IMF and other international donors halted financial support to 
Mozambique and, in turn, the country defaulted on the bonds. 
 
Respondent  
5. VTB Capital Plc, is the London-based investment banking arm of VTB Group, a 
Moscow-based holding company that is primarily owned by the Russian government. VTB operates 
through a New York-based broker-dealer known as Xtellus Capital Partners. 
Facts  
 
Events Leading up to the Exchange Offer 
The Proindicus Transaction 
6. In 2013, Credit Suisse agreed to arrange a $372 million syndicated loan to Proindicus 
SA (“Proindicus”), a newly formed company that was owned and controlled by the government of 
Mozambique. Proindicus entered into a $366 million contract with an international shipbuilding 
company (“Intermediary”) that was to provide equipment and services to Proindicus in connection 
with certain maritime projects.  Between June and August 2013, Credit Suisse agreed to upsize the 
loan to Proindicus by an additional $132 million, bringing the total to $504 million.  Several months 
later, VTB entered the transaction and extended an additional $118 million in November 2013. As a 
result, VTB was aware of the full extent of Proindicus’s indebtedness with Credit Suisse.  The then-
Minister of Finance signed a guarantee on behalf of the Republic of Mozambique for the Proindicus 
loan.  
7. Proindicus was officially established to supply vessels and training to protect 
Mozambique’s coastline and maritime interests. Further, the proceeds from the financing from Credit 
Suisse and VTB were supposed to be used exclusively for maritime projects known as the 
“Exclusive Economic Zone” project. In reality, Proindicus was set up by Mozambican government 
officials, in collusion with three senior bankers at Credit Suisse (“Banker 1,” “Banker 2” and 
“Banker 3”) (collectively “CS Bankers”) and an agent of the Intermediary (“Intermediary Agent”) in 
order to carry out an extensive scheme involving kickbacks and improper payments to government 
officials. Without VTB’s knowledge, as part of the scheme, only a portion of the loan proceeds was 
applied towards maritime projects while the rest was diverted to pay kickbacks to the CS Bankers, 
Intermediary Agent and make improper payments to Mozambican government officials. The deal 
was also structured by Credit Suisse to hide the level of Mozambique’s indebtedness from the IMF, 
which oversaw the country’s economy and closely monitored its debt levels. 
The EMATUM Transaction 
8. In September 2013, VTB and Credit Suisse acted as lead underwriters for two separate 
bond offerings totaling $850 million for LPNs issued by EMATUM, a newly state-owned entity 
controlled by the government of Mozambique. The interest-bearing amortizing LPNs were sold in 
two tranches: (1) $500 million that was underwritten and offered by Credit Suisse; and (2) $350 

  
 
million that was underwritten and offered one month later by VTB. The then-Minister of Finance 
signed a guarantee on behalf of the Republic of Mozambique for the EMATUM LPNs.  
9. EMATUM was officially created as a tuna-fishing company and entered into a $785 
million contract, dated August 2, 2013, to purchase vessels and equipment from an affiliate of the 
Intermediary. Without VTB’s knowledge, EMATUM, like Proindicus, was set up by Mozambican 
government officials, in collusion with the CS Bankers and the Intermediary Agent in order to divert 
offering proceeds to pay kickbacks to the CS Bankers, the Intermediary, and to continue the 
improper payment scheme. Only a portion of the proceeds was applied towards the stated purpose of 
fishing vessels and related equipment.  
10. The bond offerings were completed by VTB and Credit Suisse without a valuation of 
the boats to be purchased by EMATUM. In addition, as with the Proindicus transaction, the 
Intermediary was involved, all the proceeds were remitted to the Intermediary instead of the 
borrower in Mozambique, and there was no approval by the parliament or disclosure to the IMF. 
IMF Discovery of the EMATUM Transaction 
11. Starting in late September 2013, several news outlets reported that proceeds from the 
EMATUM transaction had been applied towards Mozambique’s procurement of defense-style patrol 
vessels from a French shipyard owned by Intermediary. Based on this reporting, the IMF, for the first 
time, became aware that a Mozambican state-owned entity, EMATUM, avoided certain government 
controls and used proceeds from the transaction to improperly purchase defense -style patrol vessels. 
A marketing document prepared by VTB on and around September 25, 2013, included that “the use 
of proceeds includes fishing vessels and ancillary defense fleet.” By November 2013, as VTB knew 
or should have known, the IMF recommended that Mozambique include a significant portion of the 
EMATUM obligation as defense spending in the country’s 2014 budget. 
12. In its country reports from January 2014 through 2015, as VTB was aware, the IMF 
noted several risks and concerns surrounding the EMATUM transaction. In the January 2014 country 
report, the IMF calculated that the transaction accounted for 6% of Mozambique’s GDP and 
commented on “the lack of transparency regarding the use of the funds and the secretive manner in 
which the project was evaluated, selected, and implemented outside the government’s macro-
economic strategy....” The August 2015 IMF country report analyzed the EMATUM transaction and 
noted that the “lack of transparency surrounding the project raised serious governance concerns” and 
that “the project should have proceeded on a competitive basis by looking at various cost options... 
rather than granting the contract to one supplier [Intermediary] and paying in advance.” In its 
December 2015 IMF Staff Report, the IMF noted that “debt service has become more challenging as 
the beginning of repayments on the EMATUM bond has doubled debt service commitments in 
nominal terms, placing some strain on [] balance of payments....” The IMF also noted that it was 
“important to exercise caution in contraction of new external debt” and that “limiting the issuance of 
public guarantees and enhancing monitoring of financial positions of state-owned enterprises are 
crucial.” 
 

  
 
The Mozambique Asset Management Transaction 
13. In May 2014, VTB and an entity related to the Intermediary where Banker 1 and 
Banker 2 then worked after leaving Credit Suisse, arranged for a maximum $540 million syndicated 
loan to yet another Mozambican state-owned entity known as Mozambique Asset Management 
(“MAM”). As with Proindicus and EMATUM, the-then Minister of Finance signed a guarantee on 
behalf of the Republic of Mozambique for the MAM loan. Similarly, as with the prior transactions, 
MAM retained the Intermediary to build shipyards and help MAM construct and service naval 
vessels acquired in the Proindicus and EMATUM transactions. An internal VTB memo noted that 
the Facility Agreement would include an undertaking that no funds could be used to acquire 
armaments or ammunition. The MAM transaction was, again, done without approval of the 
parliament or disclosure to the IMF. 
14. By the time of the MAM loan, VTB understood Mozambique’s total indebtedness 
included prior guaranteed debt from transactions with Credit Suisse. VTB, for example, circulated 
the internal memo that reflected a table on Mozambique’s debt profile, including EMATUM, 
Proindicus and MAM. The MAM financing would contribute 3.5% of GDP to the total government 
debt, while all three government guaranteed financings contributed 13%, and significantly increased 
non-concessional debt. The internal VTB memo highlighted that Mozambique is one of the most 
donor-dependent countries and that donors were critical of the lack of transparency surrounding the 
EMATUM LPNs. 
The 2016 Exchange Offer 
15.  By December 2014, the companies were unable to service the nearly $2 billion in debt 
that had been amassed through the Proindicus, EMATUM and MAM transactions. EMATUM’s 
audited financial statements for the year ended December 31, 2014, showed a loss of over $25 
million, and by mid-2015, the press had reported on EMATUM’s poor financial condition and that it 
would face a serious risk of missing its first amortization payment on the LPNs that was coming due 
in September 2015. These factors created significant reputational risk for the banks given their role in 
underwriting, distributing, marketing and selling the LPNs. 
16.  In June 2015, the Mozambican Parliament announced that the government would 
restructure the EMATUM debt to extend the repayment terms of the original amortizing LPNs. The 
MAM loan facility carried a sovereign downgrade covenant that allowed that upon such downgrade, 
all outstanding loans under the MAM facility, together with accrued interest, could be declared 
immediately due and payable. The covenant was triggered on July 6, 2015, when Standard & Poor’s 
downgraded Mozambique to B- from B, on the indication that Mozambique might not be able to 
make its first amortization payment under its guarantee on the EMATUM LPNs. On August 7, 2015, 
Moody’s downgraded Mozambique’s issuer rating to B2. Although VTB had an option to accelerate 
the MAM loan, it decided not to do so at that time in exchange for a mandate from Mozambique to 
act as co-arranger of the Exchange Offer with Credit Suisse. 
17. In connection with the Exchange Offer, Banker 1 and Banker 2 worked with VTB and 
Credit Suisse concerning the offering including the disclosure of Mozambique’s total debt. Without 
VTB’s knowledge, Banker 1 and Banker 2 remained heavily involved in the Exchange Offer to 

  
 
continue to hide the underlying kickback and improper payments scheme, in which they, Banker 3 
(who remained at Credit Suisse), the Intermediary, and Mozambican officials were secretly engaged. 
By the time of the Exchange Offer, Banker 1 and Banker 2 had left Credit Suisse to work for an 
entity associated with Intermediary now representing the Government of Mozambique.
2
 
18. In early March 2016, the Exchange Offer was announced and Credit Suisse prepared 
and distributed offering materials to solicit consent from investors holding the EMATUM LPNs. 
VTB, as a joint lead manager in the offering, distributed the same offering materials to investors and 
remained integrally involved in the disclosures made by the Republic of Mozambique and in the 
distribution and sales of the bonds. The new offering allowed investors, including approximately 
39% U.S. investors, to exchange the EMATUM LPNs for new bonds issued directly by the 
government of Mozambique. In mid-March, VTB and Credit Suisse participated in road shows in 
New York and elsewhere, where the Minister of Finance represented to investors that the information 
memorandum included the total amount of the debt of Mozambique, including all guaranteed debt. 
By March 23, 2016, bondholders voted in favor of the Exchange Offer and the results were 
announced on April 1. 
19. The offering materials contained material omissions and misleading statements that 
VTB failed to prevent, including with respect to VTB’s conflict of interest, the nature of 
Mozambique’s total indebtedness and the country’s risk of default based on the prior Proindicus and 
MAM loans which remained undisclosed to investors. 
Failure to Disclose the Proindicus and MAM Transactions and VTB’s Conflict of Interest 
20.  The offering materials that VTB prepared and distributed with Credit Suisse failed to 
disclose VTB’s significant conflicts of interests in having rights as a creditor under the Proindicus 
and MAM transactions that were adverse, in certain respects, to bondholders. The Exchange Offer 
extended Mozambique’s repayment obligations to investors to 2023 (when the bond matured), but 
Mozambique was obligated to pay the banks’ interest and principal under the Proindicus loan before 
making payments on the bonds to investors. In 2014, VTB became aware that Proindicus had not 
earned revenue and, thus, VTB, together with others, agreed to amend the loan to extend the maturity 
to 2021 (from 2019), two years before the Exchange Offer bond matured. VTB placed its interests as 
a creditor ahead of investors and protected its reputational risk at the costs of meeting its disclosure 
obligations to investors, including the failure to disclose the Proindicus and MAM transactions. 
21. The offering materials included a generic, cryptic reference to the Proindicus loan in a 
section addressing the banks’ securities investments and hedging activity and the possibility that the 
banks may engage in securities transactions involving securities of the issuer. With regard to the 
MAM transaction, the offering materials did not disclose to bondholders, in any manner, the 
existence of the MAM loan and its status as a creditor in that transaction with interests adverse, in 
certain respects, to investors. The offering materials merely disclosed: 
“in the ordinary course of their business activities, the Joint Dealer Managers and their respective affiliates 
may make or hold a broad array of investments and actively trade debt securities (or related derivative 
                                                   
2
  This same entity associated with Intermediary while employing Banker 1 and Banker 2 acted as co-Arranger of 
the MAM loan.  

  
 
securities) and financial instruments (including bank loans) for their own account and for the accounts of their 
customers. Such investments and securities activities may involve securities and/or instruments of the Issuer. 
In particular, an affiliate of Credit Suisse Securities (Europe) Limited has a lending relationship with a 
wholly-owned state entity whose obligations have the benefit of a guarantee from Mozambique. The Joint 
Dealer Managers and/or their respective affiliates that have, or may in the future have, a lending relationship 
with the Issuer or other state-owned entities, may hedge their credit exposure consistent with their customary 
risk management policies.” (Emphasis added) 
22. This disclosure failed to include material facts, such as the magnitude and terms of 
VTB’s lending relationship with the government of Mozambique through lending to state-owned 
entities in the Proindicus and MAM transactions, and its continued status as a creditor with interests 
potentially adverse, in certain respects, to investors in the EMATUM and Exchange Offer. By at least 
September 2015, VTB internally discussed that MAM was expected to default on its payment to 
VTB, coming due in May 2016, and that the loan would have to be restructured to extend payment 
obligations. 
23. VTB was also aware that Credit Suisse had asked VTB to waive its prepayment rights 
in response to a downgrade of Mozambique’s rating and prevent Mozambique from defaulting. In 
this regard, VTB discussed the need to waive its prepayment rights under the MAM loan “because a 
default under EMATUM would have severe consequences: cross defaults under Proindicus and 
MAM facilities, rating downgrades of the country and damaged investor perception.” 
Failure to Disclose the Nature of Mozambique’s Indebtedness and Risk of Default 
24. Mozambique’s total debt, including the nature of that debt, was a crucial disclosure item 
because it determined the government’s risk of default and creditworthiness in the Exchange Offer. 
However, the disclosures on the nature of Mozambique’s indebtedness were misleading by failing to 
specifically disclose the amounts arising from the Proindicus transaction and the $535 million MAM 
transaction. Instead, the prospectus merely included a series of opaque debt tables that failed to 
disclose the true nature of Mozambique’s debt and significant risk of default. 
25.  By the time of the Exchange Offer, VTB knew the full amount of Mozambique’s 
indebtedness on the Proindicus and MAM transactions, but failed to prevent misleading debt 
disclosures about the Proindicus transaction and did not disclose the MAM transaction. VTB was 
negligent insofar as it engaged in these disclosure failures despite having significant concerns 
regarding the reliability and accuracy of the debt figures provided by Mozambique and Bankers 1 
and 2. 
26. Through December 2015 the VTB team working on the disclosures noticed that early 
drafts of the offering prospectus excluded data on guarantees of indebtedness of state-owned entities. 
One draft provided Mozambique’s external debt in US dollar amounts with a statement that the debt 
“does not include guarantees given by the Government in favour of [State Owned Entities]” and that 
the Government has guaranteed the $850 million LPNs. VTB prepared a separate document, as part 
of its diligence, that contained the same figures but included entries for Proindicus and MAM, 
recognizing that indebtedness from Proindicus and MAM was not included. 

  
 
27. VTB learned that debt information being reported from Mozambique and its 
representatives was unreliable, as is reflected in a series of February 2016 emails. A banker from 
Credit Suisse told a VTB deal team member that “the [debt figure] numbers that were included into 
the latest version are misleading as they refer to different periods of time/some of them include g’tees 
and some not.” The deal team also identified that the debt figures provided by Mozambique “show 
sizable the gap between the total debt stock disclosed to [the banks] and the IMF” and “seems to be 
excluding guarantees.” Significantly, an analysis prepared by Banker 2 contained so many 
inconsistencies and omissions that a senior member of the VTB deal team referred to it as 
“nonsense” and that Banker 2, who prepared the analysis, had “little clue in general.” 
28.  VTB understood that the debt disclosures were not lining up and should have known 
that the disclosure item would be presented to investors in an opaque and misleading manner. In a 
March 2016 email, Credit Suisse’s deal team informed VTB that the “maturity profile is not inclusive 
of gteed figures” and “would prefer all totals to match up (to avoid side by side display of gteed vs 
direct totals).” The side by side display would have called into question the size of the guaranteed 
debt, including Proindicus and MAM figures which neither VTB nor Credit Suisse had disclosed to 
investors.  
29.  In the underwriting process, VTB personnel recognized the need to disclose all of 
Mozambique’s guaranteed debt including Proindicus and MAM, but ultimately abandoned these 
efforts due to resistance from the government of Mozambique and Bankers 1 and 2 and Credit 
Suisse. VTB’s deal team, for example, discussed that “[Credit Suisse] seemed to have disengaged, or 
at least is not proactively pushing the Govt,” but failed themselves to ensure that accurate and 
fulsome disclosures were made. 
30. In a February 10, 2016, email that was later circulated to VTB, Banker 1 and others 
acting for Mozambique discussed that “[i]t is understood (and abundantly clear from the letter) that 
no reference to either Proindicus or MAM may be included in the bond prospectus [...].” The same 
email recognized that this level of inadequate disclosure “may mean that the letter does not serve its 
desired purpose of getting at least one of [either VTB or Credit Suisse] across the line internally.” 
The email warned that “the level of disclosure (and details as regards debt figures) remains fully 
within the control of [Minister of Finance]” and, thus, “project names will not be disclosed in the 
prospectus.” At the same time, VTB identified Banker 1 as untrustworthy and that “everything he 
says has to be discounted,” yet continued to rely on him for obtaining information on Mozambique’s 
indebtedness. 
31. Despite numerous and significant red flags and concerns that were presented regarding 
the accuracy of the debt disclosures, VTB unreasonably gave in to pressure from Mozambican 
officials and others and failed to prevent the debt from being disclosed in a misleading manner in the 
offering materials that VTB prepared and distributed with Credit Suisse. VTB accepted 
Mozambique’s demand that the debt figure should be disclosed in a series of complex tables, as 
opposed to a full break-out of each category of government guaranteed debt or disclosing the 
existence of the Proindicus and MAM indebtedness. Mozambique represented that the prospectus 
debt figures matched the January 2016 IMF country report and included all guaranteed debts. But as 

  
 
VTB should have recognized, neither Proindicus nor MAM indebtedness were disclosed in any IMF 
country report.  
32.  Based on VTB’s disclosure failures, the debt numbers that were ultimately included in 
the Exchange prospectus were materially misleading because they failed to accurately disclose the 
full nature of Mozambique’s indebtedness, including as to Mozambique’s debt from the Proindicus 
and MAM loans. 
Discovery of the True Nature of Indebtedness by Investors and  
Mozambique’s Default on the Bond  
 
33. In April 2016, after press reports regarding the existence of other guaranteed debt, the 
government of Mozambique disclosed the existence of the Proindicus and MAM loans. On April 23, 
2016, the IMF disclosed that Mozambique had previously failed to report to the IMF more than 
$1.35 billion in debt, including the $622 million loan to Proindicus and $535 million loan to MAM. 
In June 2016 the IMF and 14 other donor groups suspended lending and aid packages to 
Mozambique, and the IMF called for an independent audit of Proindicus, EMATUM, and MAM. In 
June 2017, the audit report, conducted by an international auditing firm, concluded that $713 million 
was missing between the Intermediary invoices and the market price of the boats that were provided 
in the Proindicus and EMATUM transactions. Earlier, in January 2017, when its debt constituted 
112% of its GDP, Mozambique announced that it would default on its debt obligations and, since 
then, has not made any payments on the Exchange Offer, Proindicus, or MAM transactions. 
 
Violations and Findings  
34. As a result of the conduct above, the Commission finds that VTB violated Section 
17(a)(2) of the Securities Act, which proscribes obtaining “money or property by means of any 
untrue statement of a material fact or any omission to state a material fact necessary in order to make 
the statements made, in light of the circumstances under which they were made, not misleading,” and 
Section 17(a)(3) of the Securities Act, which proscribes engaging “in any transaction, practice, or 
course of business which operates or would operate as a fraud or deceit upon the purchaser.” A 
violation of these provisions does not require scienter and may rest on a finding of negligence. See 
Aaron v. SEC, 446 U.S. 680, 685, 701-02 (1980). 
I V . 
In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent VTB’s Offer. 
Accordingly, it is hereby ORDERED that: 
A. Pursuant to Section 8A of the Securities Act, Respondent cease and desist from 
committing or causing any violations and any future violations of Sections 17(a)(2) and 
17(a)(3) of the Securities Act. 
B. Respondent shall, within 10 days of the entry of this Order, pay disgorgement of 
$2,000,000 and prejudgment interest of $429,883.94 to the Securities and Exchange 

  
 
Commission for transfer to the general fund of the United States Treasury, subject to Exchange 
Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant 
to SEC Rule of Practice 600. 
C. Respondent shall, within 10 days of the entry of this Order, pay a civil money 
penalty in the amount of $4,000,000 to the Securities and Exchange Commission for transfer 
to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). 
If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717. 
The Commission may distribute civil money penalties collected in this proceeding if, in its 
discretion, the Commission orders the establishment of a Fair Fund pursuant to 15 U.S.C. § 
7246, Section 308(a) of the Sarbanes-Oxley Act of 2002. The Commission will hold funds 
paid pursuant to this paragraph in an account at the United States Treasury pending a decision 
whether the Commission, in its discretion, will seek to distribute funds or, subject to Exchange 
Act Section 21F(g)(3), transfer them to the general fund of the United States Treasury. 
Payment must be made in one of the following ways: 
(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request; 
(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 
(3) Respondent may pay by certified check, bank cashier’s check, or United 
States  postal  money  order,  made  payable  to  the  Securities  and  Exchange 
Commission and hand-delivered or mailed to: 
Enterprise Services Center 
Accounts Receivable Branch  
HQ Bldg., Room 181, AMZ-341  
6500 South MacArthur Boulevard  
Oklahoma City, OK 73169 
 Payments by check or money order must be accompanied by a cover letter 
identifying VTB Capital plc as a Respondent in these proceedings, and the file number of 
these proceedings; a copy of the cover letter and check or money order must be sent to Anita 
B. Bandy, Associate Director, Division of Enforcement, Securities and Exchange Commission, 
100 F St., NE, Washington, DC 20549-6561. 
Amounts  ordered  to  be  paid  as  civil  money  penalties  pursuant  to  this  Order  shall  be  treated  as 
penalties  paid  to  the  government  for  all  purposes,  including  all  tax  purposes.  To  preserve  the 
deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 
not  argue  that  it  is  entitled  to,  nor  shall  it  benefit  by,  offset  or  reduction  of  any  award  of 
compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 
this  action  ("Penalty  Offset"). If  the  court  in  any  Related  Investor  Action  grants  such  a  Penalty 
Offset,  Respondent  agrees  that  it  shall,  within  30  days  after  entry  of  a  final  order  granting  the 

  
 
Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 
Offset  to  the  Securities  and  Exchange  Commission.  Such  a  payment  shall  not  be  deemed  an 
additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 
in  this  proceeding. For  purposes  of this  paragraph,  a  "Related  Investor  Action"  means  a  private 
damages  action  brought  against  Respondent  by  or  on  behalf  of  one  or  more  investors  based  on 
substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.  
 
 By the Commission. 
 
 
 
Vanessa A. Countryman 
        Secretary 

UNITED STATES OF AMERICA 
Before the 

SECURITIES AND EXCHANGE COMMISSION 
 

SECURITIES ACT OF 1933  
Release No. 11000 / October 19, 2021 

ADMINISTRATIVE PROCEEDING  
File No. 3-20628 

In the Matter of 

VTB Capital plc 

Respondent. 

ORDER INSTITUTING CEASE-AND-DESIST 
PROCEEDINGS PURSUANT TO SECTION 8A OF 
THE SECURITIES ACT OF 1933, MAKING 
FINDINGS, AND IMPOSING A CEASE-AND-
DESIST ORDER 

 

I .  

The Securities and Exchange Commission (“Commission”) deems it appropriate that 

cease-and-desist proceedings be, and hereby are, instituted pursuant to Section 8A of the 

Securities Act of 1933 (“Securities Act”), against VTB Capital plc (“VTB” or “Respondent”). 

II .  

In anticipation of the institution of these proceedings, Respondent has submitted an Offer 

of Settlement (the “Offer”) which the Commission has determined to accept. Solely for the 

purpose of these proceedings and any other proceedings brought by or on behalf of the 

Commission, or to which the Commission is a party, and without admitting or denying the 

findings herein, except as to the Commission’s jurisdiction over it and the subject matter of these 

proceedings, which are admitted, Respondent consents to the entry of this Order Instituting 

Cease-and-Desist Proceedings Pursuant to Section 8A of the Securities Act of 1933, Making 

Findings, and Imposing a Cease-and-Desist Order (“Order”), as set forth below. 

  



  

 

 III.  

On the basis of this Order and Respondent’s Offer, the Commission finds1 that: 

Summary  

1. This matter concerns material omissions and misleading statements in a 2016 bond 

offering for which VTB Capital Plc (“VTB”), a London-based investment bank, acted with Credit 

Suisse Group AG (“Credit Suisse”) as joint-lead manager.  The bond offering allowed investors from 

a prior 2013 bond offering to exchange their loan participation notes (“LPNs”) for a direct sovereign 

bond issued by the Republic of Mozambique (“Exchange Offer”).  Credit Suisse structured the 

bonds, while both banks prepared and distributed the offering materials.  The offering materials 

provided to the Exchange Offer investors by VTB failed to disclose VTB’s conflict of interest—that 

the bank was a major creditor under two prior financing arrangements with Mozambican state-owned 

entities with interests adverse, in certain respects, to noteholders. The offering materials also failed to 

disclose the full nature of Mozambique’s indebtedness and, relatedly, its risk of default on the notes.   

2. VTB and Credit Suisse participated in three interconnected transactions that preceded 

the Exchange Offer, including: (1) a 2013 $622 million syndicated loan to a Mozambican state-

owned entity known as Proindicus S.A of which VTB provided $118 million in financing; (2) a 2013 

$850 million offering of interest-bearing LPNs to finance debt offered to a second Mozambican 

state-owned entity known as Empresa Mocambicana de Atum S.A. (“EMATUM”), of which VTB 

arranged $350 million in financing; and, without Credit Suisse, (3) a 2014 $535 million syndicated 

loan to a third Mozambican state-owned entity known as Mozambique Asset Management 

(“MAM”), of which VTB provided $435 million in financing. The then-Minister of Finance signed a 

guarantee on behalf of Mozambique for each of these transactions. Mozambique has since disputed 

the validity of the guarantees. 

3. By 2016, after VTB and Credit Suisse learned that EMATUM faced a serious risk of 

default on its first amortization payment to investors, VTB and Credit Suisse structured the Exchange 

Offer to allow investors to exchange the prior LPNs for new sovereign bonds issued directly by the 

government of Mozambique. Acting with Credit Suisse, VTB was integrally involved in the 

disclosures that were required to be made by the Republic of Mozambique as issuer, including 

Mozambique’s guaranteed debt. The debt figure in the prospectus was materially misleading because 

the prospectus failed to accurately disclose the full nature of Mozambique’s indebtedness which, as 

VTB knew, included the over $500 million in financing that VTB provided in the Proindicus and 

MAM transactions and over $500 million in financing that Credit Suisse had provided. VTB also 

failed to disclose to investors the existence of the Proindicus and MAM transactions, including 

VTB’s status as a creditor with rights to obtain interest payments ahead of investors from these prior 

undisclosed transactions. As a result, investors in the Exchange Offer were misled regarding material 

information such as the true nature of the country’s debt, the high risk of default of the bond and that 

VTB had placed its own interests as a creditor above bondholders.   

                                                   
1 The findings herein are made pursuant to Respondent's Offer of Settlement and are not binding on any other 
person or entity in this or any other proceeding. 



  

 

4. In April 2016, shortly after investors approved the Exchange Offer and after news 

reports on “secret” debt, Mozambique disclosed the Proindicus and MAM transactions and the true 

nature of its guaranteed debt. Simultaneously, the International Monetary Fund (“IMF”) disclosed 

that since at least 2013, Mozambique had misrepresented its public and publicly-guaranteed 

indebtedness to the IMF.  The IMF and other international donors halted financial support to 

Mozambique and, in turn, the country defaulted on the bonds. 

 

Respondent  

5. VTB Capital Plc, is the London-based investment banking arm of VTB Group, a 

Moscow-based holding company that is primarily owned by the Russian government. VTB operates 

through a New York-based broker-dealer known as Xtellus Capital Partners. 

Facts  

 

Events Leading up to the Exchange Offer 

The Proindicus Transaction 

6. In 2013, Credit Suisse agreed to arrange a $372 million syndicated loan to Proindicus 

SA (“Proindicus”), a newly formed company that was owned and controlled by the government of 

Mozambique. Proindicus entered into a $366 million contract with an international shipbuilding 

company (“Intermediary”) that was to provide equipment and services to Proindicus in connection 

with certain maritime projects.  Between June and August 2013, Credit Suisse agreed to upsize the 

loan to Proindicus by an additional $132 million, bringing the total to $504 million.  Several months 

later, VTB entered the transaction and extended an additional $118 million in November 2013. As a 

result, VTB was aware of the full extent of Proindicus’s indebtedness with Credit Suisse.  The then-

Minister of Finance signed a guarantee on behalf of the Republic of Mozambique for the Proindicus 

loan.  

7. Proindicus was officially established to supply vessels and training to protect 

Mozambique’s coastline and maritime interests. Further, the proceeds from the financing from Credit 

Suisse and VTB were supposed to be used exclusively for maritime projects known as the 

“Exclusive Economic Zone” project. In reality, Proindicus was set up by Mozambican government 

officials, in collusion with three senior bankers at Credit Suisse (“Banker 1,” “Banker 2” and 

“Banker 3”) (collectively “CS Bankers”) and an agent of the Intermediary (“Intermediary Agent”) in 

order to carry out an extensive scheme involving kickbacks and improper payments to government 

officials. Without VTB’s knowledge, as part of the scheme, only a portion of the loan proceeds was 

applied towards maritime projects while the rest was diverted to pay kickbacks to the CS Bankers, 

Intermediary Agent and make improper payments to Mozambican government officials. The deal 

was also structured by Credit Suisse to hide the level of Mozambique’s indebtedness from the IMF, 

which oversaw the country’s economy and closely monitored its debt levels. 

The EMATUM Transaction 

8. In September 2013, VTB and Credit Suisse acted as lead underwriters for two separate 

bond offerings totaling $850 million for LPNs issued by EMATUM, a newly state-owned entity 

controlled by the government of Mozambique. The interest-bearing amortizing LPNs were sold in 

two tranches: (1) $500 million that was underwritten and offered by Credit Suisse; and (2) $350 



  

 

million that was underwritten and offered one month later by VTB. The then-Minister of Finance 

signed a guarantee on behalf of the Republic of Mozambique for the EMATUM LPNs.  

9. EMATUM was officially created as a tuna-fishing company and entered into a $785 

million contract, dated August 2, 2013, to purchase vessels and equipment from an affiliate of the 

Intermediary. Without VTB’s knowledge, EMATUM, like Proindicus, was set up by Mozambican 

government officials, in collusion with the CS Bankers and the Intermediary Agent in order to divert 

offering proceeds to pay kickbacks to the CS Bankers, the Intermediary, and to continue the 

improper payment scheme. Only a portion of the proceeds was applied towards the stated purpose of 

fishing vessels and related equipment.  

10. The bond offerings were completed by VTB and Credit Suisse without a valuation of 

the boats to be purchased by EMATUM. In addition, as with the Proindicus transaction, the 

Intermediary was involved, all the proceeds were remitted to the Intermediary instead of the 

borrower in Mozambique, and there was no approval by the parliament or disclosure to the IMF. 

IMF Discovery of the EMATUM Transaction 

11. Starting in late September 2013, several news outlets reported that proceeds from the 

EMATUM transaction had been applied towards Mozambique’s procurement of defense-style patrol 

vessels from a French shipyard owned by Intermediary. Based on this reporting, the IMF, for the first 

time, became aware that a Mozambican state-owned entity, EMATUM, avoided certain government 

controls and used proceeds from the transaction to improperly purchase defense -style patrol vessels. 

A marketing document prepared by VTB on and around September 25, 2013, included that “the use 

of proceeds includes fishing vessels and ancillary defense fleet.” By November 2013, as VTB knew 

or should have known, the IMF recommended that Mozambique include a significant portion of the 

EMATUM obligation as defense spending in the country’s 2014 budget. 

12. In its country reports from January 2014 through 2015, as VTB was aware, the IMF 

noted several risks and concerns surrounding the EMATUM transaction. In the January 2014 country 

report, the IMF calculated that the transaction accounted for 6% of Mozambique’s GDP and 

commented on “the lack of transparency regarding the use of the funds and the secretive manner in 

which the project was evaluated, selected, and implemented outside the government’s macro-

economic strategy....” The August 2015 IMF country report analyzed the EMATUM transaction and 

noted that the “lack of transparency surrounding the project raised serious governance concerns” and 

that “the project should have proceeded on a competitive basis by looking at various cost options... 

rather than granting the contract to one supplier [Intermediary] and paying in advance.” In its 

December 2015 IMF Staff Report, the IMF noted that “debt service has become more challenging as 

the beginning of repayments on the EMATUM bond has doubled debt service commitments in 

nominal terms, placing some strain on [] balance of payments....” The IMF also noted that it was 

“important to exercise caution in contraction of new external debt” and that “limiting the issuance of 

public guarantees and enhancing monitoring of financial positions of state-owned enterprises are 

crucial.” 

 



  

 

The Mozambique Asset Management Transaction 

13. In May 2014, VTB and an entity related to the Intermediary where Banker 1 and 

Banker 2 then worked after leaving Credit Suisse, arranged for a maximum $540 million syndicated 

loan to yet another Mozambican state-owned entity known as Mozambique Asset Management 

(“MAM”). As with Proindicus and EMATUM, the-then Minister of Finance signed a guarantee on 

behalf of the Republic of Mozambique for the MAM loan. Similarly, as with the prior transactions, 

MAM retained the Intermediary to build shipyards and help MAM construct and service naval 

vessels acquired in the Proindicus and EMATUM transactions. An internal VTB memo noted that 

the Facility Agreement would include an undertaking that no funds could be used to acquire 

armaments or ammunition. The MAM transaction was, again, done without approval of the 

parliament or disclosure to the IMF. 

14. By the time of the MAM loan, VTB understood Mozambique’s total indebtedness 

included prior guaranteed debt from transactions with Credit Suisse. VTB, for example, circulated 

the internal memo that reflected a table on Mozambique’s debt profile, including EMATUM, 

Proindicus and MAM. The MAM financing would contribute 3.5% of GDP to the total government 

debt, while all three government guaranteed financings contributed 13%, and significantly increased 

non-concessional debt. The internal VTB memo highlighted that Mozambique is one of the most 

donor-dependent countries and that donors were critical of the lack of transparency surrounding the 

EMATUM LPNs. 

The 2016 Exchange Offer 

15.  By December 2014, the companies were unable to service the nearly $2 billion in debt 

that had been amassed through the Proindicus, EMATUM and MAM transactions. EMATUM’s 

audited financial statements for the year ended December 31, 2014, showed a loss of over $25 

million, and by mid-2015, the press had reported on EMATUM’s poor financial condition and that it 

would face a serious risk of missing its first amortization payment on the LPNs that was coming due 

in September 2015. These factors created significant reputational risk for the banks given their role in 

underwriting, distributing, marketing and selling the LPNs. 

16.  In June 2015, the Mozambican Parliament announced that the government would 

restructure the EMATUM debt to extend the repayment terms of the original amortizing LPNs. The 

MAM loan facility carried a sovereign downgrade covenant that allowed that upon such downgrade, 

all outstanding loans under the MAM facility, together with accrued interest, could be declared 

immediately due and payable. The covenant was triggered on July 6, 2015, when Standard & Poor’s 

downgraded Mozambique to B- from B, on the indication that Mozambique might not be able to 

make its first amortization payment under its guarantee on the EMATUM LPNs. On August 7, 2015, 

Moody’s downgraded Mozambique’s issuer rating to B2. Although VTB had an option to accelerate 

the MAM loan, it decided not to do so at that time in exchange for a mandate from Mozambique to 

act as co-arranger of the Exchange Offer with Credit Suisse. 

17. In connection with the Exchange Offer, Banker 1 and Banker 2 worked with VTB and 

Credit Suisse concerning the offering including the disclosure of Mozambique’s total debt. Without 

VTB’s knowledge, Banker 1 and Banker 2 remained heavily involved in the Exchange Offer to 



  

 

continue to hide the underlying kickback and improper payments scheme, in which they, Banker 3 

(who remained at Credit Suisse), the Intermediary, and Mozambican officials were secretly engaged. 

By the time of the Exchange Offer, Banker 1 and Banker 2 had left Credit Suisse to work for an 

entity associated with Intermediary now representing the Government of Mozambique.2 

18. In early March 2016, the Exchange Offer was announced and Credit Suisse prepared 

and distributed offering materials to solicit consent from investors holding the EMATUM LPNs. 

VTB, as a joint lead manager in the offering, distributed the same offering materials to investors and 

remained integrally involved in the disclosures made by the Republic of Mozambique and in the 

distribution and sales of the bonds. The new offering allowed investors, including approximately 

39% U.S. investors, to exchange the EMATUM LPNs for new bonds issued directly by the 

government of Mozambique. In mid-March, VTB and Credit Suisse participated in road shows in 

New York and elsewhere, where the Minister of Finance represented to investors that the information 

memorandum included the total amount of the debt of Mozambique, including all guaranteed debt. 

By March 23, 2016, bondholders voted in favor of the Exchange Offer and the results were 

announced on April 1. 

19. The offering materials contained material omissions and misleading statements that 

VTB failed to prevent, including with respect to VTB’s conflict of interest, the nature of 

Mozambique’s total indebtedness and the country’s risk of default based on the prior Proindicus and 

MAM loans which remained undisclosed to investors. 

Failure to Disclose the Proindicus and MAM Transactions and VTB’s Conflict of Interest 

20.  The offering materials that VTB prepared and distributed with Credit Suisse failed to 

disclose VTB’s significant conflicts of interests in having rights as a creditor under the Proindicus 

and MAM transactions that were adverse, in certain respects, to bondholders. The Exchange Offer 

extended Mozambique’s repayment obligations to investors to 2023 (when the bond matured), but 

Mozambique was obligated to pay the banks’ interest and principal under the Proindicus loan before 

making payments on the bonds to investors. In 2014, VTB became aware that Proindicus had not 

earned revenue and, thus, VTB, together with others, agreed to amend the loan to extend the maturity 

to 2021 (from 2019), two years before the Exchange Offer bond matured. VTB placed its interests as 

a creditor ahead of investors and protected its reputational risk at the costs of meeting its disclosure 

obligations to investors, including the failure to disclose the Proindicus and MAM transactions. 

21. The offering materials included a generic, cryptic reference to the Proindicus loan in a 

section addressing the banks’ securities investments and hedging activity and the possibility that the 

banks may engage in securities transactions involving securities of the issuer. With regard to the 

MAM transaction, the offering materials did not disclose to bondholders, in any manner, the 

existence of the MAM loan and its status as a creditor in that transaction with interests adverse, in 

certain respects, to investors. The offering materials merely disclosed: 

“in the ordinary course of their business activities, the Joint Dealer Managers and their respective affiliates 
may make or hold a broad array of investments and actively trade debt securities (or related derivative 

                                                   
2  This same entity associated with Intermediary while employing Banker 1 and Banker 2 acted as co-Arranger of 
the MAM loan.  



  

 

securities) and financial instruments (including bank loans) for their own account and for the accounts of their 
customers. Such investments and securities activities may involve securities and/or instruments of the Issuer. 
In particular, an affiliate of Credit Suisse Securities (Europe) Limited has a lending relationship with a 
wholly-owned state entity whose obligations have the benefit of a guarantee from Mozambique. The Joint 
Dealer Managers and/or their respective affiliates that have, or may in the future have, a lending relationship 
with the Issuer or other state-owned entities, may hedge their credit exposure consistent with their customary 
risk management policies.” (Emphasis added) 

22. This disclosure failed to include material facts, such as the magnitude and terms of 

VTB’s lending relationship with the government of Mozambique through lending to state-owned 

entities in the Proindicus and MAM transactions, and its continued status as a creditor with interests 

potentially adverse, in certain respects, to investors in the EMATUM and Exchange Offer. By at least 

September 2015, VTB internally discussed that MAM was expected to default on its payment to 

VTB, coming due in May 2016, and that the loan would have to be restructured to extend payment 

obligations. 

23. VTB was also aware that Credit Suisse had asked VTB to waive its prepayment rights 

in response to a downgrade of Mozambique’s rating and prevent Mozambique from defaulting. In 

this regard, VTB discussed the need to waive its prepayment rights under the MAM loan “because a 

default under EMATUM would have severe consequences: cross defaults under Proindicus and 

MAM facilities, rating downgrades of the country and damaged investor perception.” 

Failure to Disclose the Nature of Mozambique’s Indebtedness and Risk of Default 

24. Mozambique’s total debt, including the nature of that debt, was a crucial disclosure item 

because it determined the government’s risk of default and creditworthiness in the Exchange Offer. 

However, the disclosures on the nature of Mozambique’s indebtedness were misleading by failing to 

specifically disclose the amounts arising from the Proindicus transaction and the $535 million MAM 

transaction. Instead, the prospectus merely included a series of opaque debt tables that failed to 

disclose the true nature of Mozambique’s debt and significant risk of default. 

25.  By the time of the Exchange Offer, VTB knew the full amount of Mozambique’s 

indebtedness on the Proindicus and MAM transactions, but failed to prevent misleading debt 

disclosures about the Proindicus transaction and did not disclose the MAM transaction. VTB was 

negligent insofar as it engaged in these disclosure failures despite having significant concerns 

regarding the reliability and accuracy of the debt figures provided by Mozambique and Bankers 1 

and 2. 

26. Through December 2015 the VTB team working on the disclosures noticed that early 

drafts of the offering prospectus excluded data on guarantees of indebtedness of state-owned entities. 

One draft provided Mozambique’s external debt in US dollar amounts with a statement that the debt 

“does not include guarantees given by the Government in favour of [State Owned Entities]” and that 

the Government has guaranteed the $850 million LPNs. VTB prepared a separate document, as part 

of its diligence, that contained the same figures but included entries for Proindicus and MAM, 

recognizing that indebtedness from Proindicus and MAM was not included. 



  

 

27. VTB learned that debt information being reported from Mozambique and its 

representatives was unreliable, as is reflected in a series of February 2016 emails. A banker from 

Credit Suisse told a VTB deal team member that “the [debt figure] numbers that were included into 

the latest version are misleading as they refer to different periods of time/some of them include g’tees 

and some not.” The deal team also identified that the debt figures provided by Mozambique “show 

sizable the gap between the total debt stock disclosed to [the banks] and the IMF” and “seems to be 

excluding guarantees.” Significantly, an analysis prepared by Banker 2 contained so many 

inconsistencies and omissions that a senior member of the VTB deal team referred to it as 

“nonsense” and that Banker 2, who prepared the analysis, had “little clue in general.” 

28.  VTB understood that the debt disclosures were not lining up and should have known 

that the disclosure item would be presented to investors in an opaque and misleading manner. In a 

March 2016 email, Credit Suisse’s deal team informed VTB that the “maturity profile is not inclusive 

of gteed figures” and “would prefer all totals to match up (to avoid side by side display of gteed vs 

direct totals).” The side by side display would have called into question the size of the guaranteed 

debt, including Proindicus and MAM figures which neither VTB nor Credit Suisse had disclosed to 

investors.  

29.  In the underwriting process, VTB personnel recognized the need to disclose all of 

Mozambique’s guaranteed debt including Proindicus and MAM, but ultimately abandoned these 

efforts due to resistance from the government of Mozambique and Bankers 1 and 2 and Credit 

Suisse. VTB’s deal team, for example, discussed that “[Credit Suisse] seemed to have disengaged, or 

at least is not proactively pushing the Govt,” but failed themselves to ensure that accurate and 

fulsome disclosures were made. 

30. In a February 10, 2016, email that was later circulated to VTB, Banker 1 and others 

acting for Mozambique discussed that “[i]t is understood (and abundantly clear from the letter) that 

no reference to either Proindicus or MAM may be included in the bond prospectus [...].” The same 

email recognized that this level of inadequate disclosure “may mean that the letter does not serve its 

desired purpose of getting at least one of [either VTB or Credit Suisse] across the line internally.” 

The email warned that “the level of disclosure (and details as regards debt figures) remains fully 

within the control of [Minister of Finance]” and, thus, “project names will not be disclosed in the 

prospectus.” At the same time, VTB identified Banker 1 as untrustworthy and that “everything he 

says has to be discounted,” yet continued to rely on him for obtaining information on Mozambique’s 

indebtedness. 

31. Despite numerous and significant red flags and concerns that were presented regarding 

the accuracy of the debt disclosures, VTB unreasonably gave in to pressure from Mozambican 

officials and others and failed to prevent the debt from being disclosed in a misleading manner in the 

offering materials that VTB prepared and distributed with Credit Suisse. VTB accepted 

Mozambique’s demand that the debt figure should be disclosed in a series of complex tables, as 

opposed to a full break-out of each category of government guaranteed debt or disclosing the 

existence of the Proindicus and MAM indebtedness. Mozambique represented that the prospectus 

debt figures matched the January 2016 IMF country report and included all guaranteed debts. But as 



  

 

VTB should have recognized, neither Proindicus nor MAM indebtedness were disclosed in any IMF 

country report.  

32.  Based on VTB’s disclosure failures, the debt numbers that were ultimately included in 

the Exchange prospectus were materially misleading because they failed to accurately disclose the 

full nature of Mozambique’s indebtedness, including as to Mozambique’s debt from the Proindicus 

and MAM loans. 

Discovery of the True Nature of Indebtedness by Investors and  

Mozambique’s Default on the Bond  

 

33. In April 2016, after press reports regarding the existence of other guaranteed debt, the 

government of Mozambique disclosed the existence of the Proindicus and MAM loans. On April 23, 

2016, the IMF disclosed that Mozambique had previously failed to report to the IMF more than 

$1.35 billion in debt, including the $622 million loan to Proindicus and $535 million loan to MAM. 

In June 2016 the IMF and 14 other donor groups suspended lending and aid packages to 

Mozambique, and the IMF called for an independent audit of Proindicus, EMATUM, and MAM. In 

June 2017, the audit report, conducted by an international auditing firm, concluded that $713 million 

was missing between the Intermediary invoices and the market price of the boats that were provided 

in the Proindicus and EMATUM transactions. Earlier, in January 2017, when its debt constituted 

112% of its GDP, Mozambique announced that it would default on its debt obligations and, since 

then, has not made any payments on the Exchange Offer, Proindicus, or MAM transactions. 

 

Violations and Findings  

34. As a result of the conduct above, the Commission finds that VTB violated Section 

17(a)(2) of the Securities Act, which proscribes obtaining “money or property by means of any 

untrue statement of a material fact or any omission to state a material fact necessary in order to make 

the statements made, in light of the circumstances under which they were made, not misleading,” and 

Section 17(a)(3) of the Securities Act, which proscribes engaging “in any transaction, practice, or 

course of business which operates or would operate as a fraud or deceit upon the purchaser.” A 

violation of these provisions does not require scienter and may rest on a finding of negligence. See 

Aaron v. SEC, 446 U.S. 680, 685, 701-02 (1980). 

I V .  

In view of the foregoing, the Commission deems it appropriate to impose the sanctions 
agreed to in Respondent VTB’s Offer. 

Accordingly, it is hereby ORDERED that: 

A. Pursuant to Section 8A of the Securities Act, Respondent cease and desist from 
committing or causing any violations and any future violations of Sections 17(a)(2) and 
17(a)(3) of the Securities Act. 

B. Respondent shall, within 10 days of the entry of this Order, pay disgorgement of 
$2,000,000 and prejudgment interest of $429,883.94 to the Securities and Exchange 



  

 

Commission for transfer to the general fund of the United States Treasury, subject to Exchange 
Act Section 21F(g)(3). If timely payment is not made, additional interest shall accrue pursuant 
to SEC Rule of Practice 600. 

C. Respondent shall, within 10 days of the entry of this Order, pay a civil money 
penalty in the amount of $4,000,000 to the Securities and Exchange Commission for transfer 
to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). 
If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717. 

The Commission may distribute civil money penalties collected in this proceeding if, in its 
discretion, the Commission orders the establishment of a Fair Fund pursuant to 15 U.S.C. § 
7246, Section 308(a) of the Sarbanes-Oxley Act of 2002. The Commission will hold funds 
paid pursuant to this paragraph in an account at the United States Treasury pending a decision 
whether the Commission, in its discretion, will seek to distribute funds or, subject to Exchange 
Act Section 21F(g)(3), transfer them to the general fund of the United States Treasury. 

Payment must be made in one of the following ways: 

(1) Respondent may transmit payment electronically to the Commission, which will 
provide detailed ACH transfer/Fedwire instructions upon request; 

(2) Respondent may make direct payment from a bank account via Pay.gov 
through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or 

(3) Respondent may pay by certified check, bank cashier’s check, or United 
States postal money order, made payable to the Securities and Exchange 
Commission and hand-delivered or mailed to: 

Enterprise Services Center 
Accounts Receivable Branch  
HQ Bldg., Room 181, AMZ-341  
6500 South MacArthur Boulevard  
Oklahoma City, OK 73169 

 Payments by check or money order must be accompanied by a cover letter 
identifying VTB Capital plc as a Respondent in these proceedings, and the file number of 
these proceedings; a copy of the cover letter and check or money order must be sent to Anita 
B. Bandy, Associate Director, Division of Enforcement, Securities and Exchange Commission, 
100 F St., NE, Washington, DC 20549-6561. 

Amounts ordered to be paid as civil money penalties pursuant to this Order shall be treated as 

penalties paid to the government for all purposes, including all tax purposes. To preserve the 

deterrent effect of the civil penalty, Respondent agrees that in any Related Investor Action, it shall 

not argue that it is entitled to, nor shall it benefit by, offset or reduction of any award of 

compensatory damages by the amount of any part of Respondent’s payment of a civil penalty in 

this action ("Penalty Offset"). If the court in any Related Investor Action grants such a Penalty 

Offset, Respondent agrees that it shall, within 30 days after entry of a final order granting the 



  

 

Penalty Offset, notify the Commission's counsel in this action and pay the amount of the Penalty 

Offset to the Securities and Exchange Commission. Such a payment shall not be deemed an 

additional civil penalty and shall not be deemed to change the amount of the civil penalty imposed 

in this proceeding. For purposes of this paragraph, a "Related Investor Action" means a private 

damages action brought against Respondent by or on behalf of one or more investors based on 

substantially the same facts as alleged in the Order instituted by the Commission in this proceeding.  

 
 By the Commission. 
 

 

 
Vanessa A. Countryman 

        Secretary