The revelation of the Paradise Papers continues to rattle cages around the world and now, social media is caught in the crossfire. Facebook and Twitter, already facing pressure over the Russian-sponsored ads last year, have been mentioned in the leaked documents. However, it’s not the founders of the site who face the spotlight but our old friend Jared Kushner.
What the documents reveal will be even more useful to Mueller’s investigation, although it’s doubtful how much it will surprise him or many in the US at this point. Put simply, two Russian state institutions, closely tied to Vladimir Putin, made massive investments in social media through a business associate of Kushner.
The scheme is complex, like many others, but in simple terms, the scheme starts with two companies: VTB Bank and Gazprom Investholding, a financial arm of a gas and energy supplier. Both institutions made significant investments in Facebook and Twitter after 2011 by funding stakeholders in both companies. Using investment vehicles (usually comprised of bonds, shares or stock options though it can vary), the companies can covertly fund social media companies.
Both institutions funded separate companies. Gazprom funded Kanton Services which, in turn, took control of DST USA II an investment vehicle that could buy shares. And buy them it did! DST USA II bought up 78 million shares from Facebook, effectively worth a billion dollars. Meanwhile, VTB Bank funded DST Investments 3 which bought up $191 million worth in shares in Twitter.
So where does Kushner come into this? How is he associated with this scheme? The answer lies with Russian business magnate, Yuri Milner who made the investments. Yuri Milner has quite a history, working for a KGB bank that laundered millions and once advised the Russian government on technology through a presidential commission. Now based in California’s Silicon Valley, Milner has invested $7bn in more than 30 online companies including Airbnb, Spotify and the Chinese retailers Alibaba and JD.com. If anyone knows about technology and where to invest it, Milner is your man!
Milner controlled both the investment companies, DST USA II which funded Facebook and DST Investments 3 which funded Twitter. His link to Kushner is a hefty sum towards Cadre, a start-up that Kushner and his brother co-owned. The size of the investment, around $850,000, is curiously secondary to the fact that Kushner failed to disclose his ownership of Cadre before he joined the White House team. He initially failed to detail his stake in Cadre in financial disclosures to the US Office of Government Ethics. Later, he added Cadre to revised paperwork, saying his stake in the firm was worth up to $25m.
What makes all of this even murkier is the fact that VTB Bank and Gazprom are both under US sanctions, most likely due to the close connections with the Russian government. VTB Bank is also close to the FSB, Russia’s intelligence service with the bank’s chairman being a former officer. Furthermore, while Milner contests being an associate of Kushner, he is close friends with Mark Zuckerburg.
This new information could not have come at a worse time for both Kushner and the minds behind Twitter and Facebook. For the social media giants, it will further fuel speculation that they helped Russia interfere with the 2016 election. However unwittingly they helped, even though the purchases mentioned were public knowledge, the devil is in the details. Facebook and Twitter will face renewed pressure to provide a clear and transparent picture of where the money comes from and from whom. They will face great suspicion from both Congress and their users as they consider having to police their own sites.
For Jared Kushner, he will be facing more pressure to cave in and seek protection from Mueller. The investigation led by Mueller is already looking into the finances of Trump and his team. Kushner is high on the list of targets, a key part of how Russia might have been involved in rigging last year’s election. Kushner really shouldn’t have tried to hide information and now it has come back to haunt him. With his father-in-law willing to throw him under the bus, Jared might see Mueller as a better chance of survival.
The Paradise Papers are revealing scandals faster than anyone can report them. From Australia and Indonesia to the UK and Canada, many wonder who will be unmasked next. Like the Panama Papers before them, the information will shape discussions and debates for years to come. It’s hard to believe that there is still more to come.
The story continues…