Global fintech Paxum and Hungarian bank OTP caught up in Romanian fraud probe

Canada-based and offshore haven-linked Paxum Inc was defrauded of some $16 million from an OTP Bank account in Bucharest, but prosecutors allege broader financial crimes surrounding the case.

Paxum, which operates through a shell company in Belize and a bank out of Dominica, specializes in payments which are legal but seen as higher risk by other financial technology companies — such as transactions for performers in the adult entertainment industry.

Paxum was recently in the news for its promotion of Ukrainian sex workers during the war, while also continuing to service OnlyFans payments inside Russia after the invasion.

Paxum’s e-wallet has over 100,000 downloads for its Google Playstore app (the Apple store does not disclose the number of downloads). It has also received numerous poor reviews lately across platforms from customers who complain that their payments are not arriving on time or in some cases not at all.

Paxum Canada, which is regulated as a “money service business” akin to most payments companies, is ultimately owned by Paxum Inc in Belize, according to public data, and it is the latter which has been under investigation in Romania.

A scam and a star

Prosecutors allege that a group identified in early May defrauded Paxum’s account at a Bucharest branch of Budapest-based OTP Bank of around $16 million, using an elaborate series of false documents.

The principal suspects in the case are Moldovan nationals Raisa, Corneliu and Laurențiu Ladin, mother and two sons.

They had been linked to Paxum in the past, according to prosecutors, through Raisa’s being one of the firm’s representatives, who had since been replaced.

The case drew additional media attention in Romania because Laurențiu Ladin is married to a famous TV drama actress, while Corneliu runs a prominent events management firm in the country, Arena Events.

The crimes under investigation are aggravated fraud, embezzelement, cyber fraud, bank fraud, money laundering, aggravated abuse of position and blackmail, the prosecutors said in a media release.

The same group is also suspected of laundering money for Russian organized crime, according to local media reports and law enforcement sources speaking to Reporter, although this accusation is not substantiated in the official documentation seen by this website.

The sums pilfered from Paxum’s accounts “were subject to an ample process of money laundering,” prosecutors said, as the funds were “divided and transmitted to several bank accounts, then withdrawn as cash which was used to buy real estate or luxury cars, pay/ credit companies where group members or their proxies were shareholders, give fictitious loans to people of Romanian, Moldovan, Ukrainian or Russian nationality, as well as transferring unusually high amounts compared to the object of the transaction,” said the prosecutors, pointing to one example in which a shareholding in a company with a nominal value of 50 Romanian lei (approx. $11) was sold for $3.39 million.

“The members of the group organised and executed an ample financial mechanism meant to ensure the deception of the banking institution,” they added. The group used “several false documents” such as legal mandates and power-of-attorney letters designed to appear as though they allowed the members of the group to access the company’s accounts, the prosecutors said.

The Ladins maintain their innocence, according to local media reports confirmed independently by Reporter. Raisa Ladin was placed under house arrest, local media reported. Neither could be contacted by Reporter.

Orders to release the money to the fraudsters came from bank management despite warnings of impropriety made by underlings, according to court proceedings covered by a local website, which also broke the news of Paxum’s involvement in the probe. Reporter has independently confirmed this by examining available court documents.

A total of 11 people were interrogated this month, including the California-based owner of Paxum, Lyudmila Postolnikova, a US national, who was brought in as a witness, law enforcement insiders said. Postolnikova is the ultimate owner of Paxum, according to law enforcement sources and publicly available data. She could not be contacted for comment.

Six people were placed formally under suspicion. Some 50 real estate properties, 17 pieces of land and 20 vehicles were seized along with freezing orders on 110 accounts in 13 banks, the authorities said.

Corrupt bankers?

The fraudsters’ connection to OTP Bank, itself a firm with deep links to Russia, is being probed by prosecutors, who suspect collusion from bankers at Hungary’s top financial institution, due to the lack of alarm raised as the suspects withdrew the cash from the account in quick succession. On some days the bank approved as much as $250.000 to be taken out of Paxum’s accounts.

The money had been sitting under sequester since 2015, when it had been linked by prosecutors and the Romanian central bank to tax evasion and international money laundering operations, according to law enforcement insiders and court documents seen by Reporter. 

As much as $290 million passed through Paxum’s Romanian accounts between 2009 and 2015, a court document shows. Paxum denied impropriety at the time. The freezing order was lifted in August 2021 and the investigation for money laundering and tax evasion closed with no further action. 

Some papers used to withdraw or transfer cash out of Paxum’s accounts, such as contracts with lawyers and bailiffs, or false contracts for financial advice, were not eligible to enable such approvals by the bank’s employees, prosecutors said.

“The incomplete, contradictory and unclear character of these [documents] was obvious,” the prosecutors said, adding that the employee approvals were only possible due to violations of various banking regulations around preventing money laundering.

Several OTP employees are under investigation, according to local media and judicial documents. An OTP spokesperson confirmed the bank made a criminal complaint in the case.

“As always, the bank monitored compliance with the legal provisions and took all necessary steps to properly manage the situation. At this time, we are working closely with the authorities involved in the investigation of the case, and until the situation is resolved we cannot provide additional information,” the spokesperson said.

“In fact, OTP Bank itself filed a criminal complaint against the issues described. We inform that, in the context mentioned, the bank’s activity wasn’t affected in any way. We reaffirm the bank’s commitment to comply with all legal provisions and court decisions.”

Risk control issues

While Paxum is the apparent victim of the $16 million fraud, another Romanian episode casts doubt over Paxum’s own risk controls against fraud and money laundering.

In 2013 a suspicious transaction of some $65,000 for another Romanian account belonging to Paxum’s e-wallet operation resulted in the payments company being sued in civil court — it lost that case, brought by BCR, the complaining correspondent bank in Romania, this February.

According to court documents, a payment originating from an account at Mediterranean Bank Malta was red-flagged along the way to Romania over suspicion of fraud. Deutsche Bank New York and Barclays UK also acted as correspondents for the transaction.

After the funds were deposited at their final destination in Paxum’s account at Romania International Bank, the Romanian correspondent bank received notice that the transaction was suspect and repaid Barclays out of its own pocket, which then repaid Deutsche Bank.

Romania International Bank later closed Paxum’s accounts over high risk of financial crime, further court files show.

Meanwhile, Paxum’s client with the Maltese account had used much of the money there, also leaving the e-wallet firm short. Then BCR, left out of pocket, sued Paxum, and in February it won, though Paxum has the right to appeal, the document shows. In parallel, the plaintiffs also made a criminal complaint in Romania against Paxum for fraud, the court document says.

Paxum did not reply to multiple requests to comment. Neither did its Romanian lawyer.

A global fintech firm

Paxum’s CEO is Andrei-Octav Moise, a Canadian resident of Romanian origin, according to the Canadian corporate registrar – which also states that the sales revenue of the company is around $574,000. Reporter independently confirmed that he is the CEO with law enforcement sources in Romania.

Moise did not respond to requests for comment, either through Paxum’s lawyer or LinkedIn.

Born in 1979, according to court documents seen by Reporter, he is also the director of Allonzo Ltd, a firm in the UK which is currently under a regulatory proposal to be struck off due to overdue accounts. The procedure to strike off was suspended in December 2021 over an objection received by the UK registrar.

Allonzo, which on its website has the same address as that given by the company in its UK registration documents, is advertising financial services for businesses, such as factoring, and uses the same web design theme as that of Paxum’s other websites. Factoring is a form of lending based on invoices issued by a company to its clients.

Paxum Bank in Dominica, which uses the same logo and links from its website to the Paxum Canada App, says its license allows “international business with non-resident personal and corporate clientele”. It advertises a range of banking services, from transfers through international payments systems such as SEPA and SWIFT, which rely on other banks having “correspondent” relationships with it, to payroll processing, savings and cards issuing. Its savings account requires a minimum initial deposit of $10,000.

The criminal procedures continue in Romania.

(With thanks to E. M. for her help editing this article.)