Illustration: Lazaro Gamio/Axios

Mike Calvey was an American success story in Moscow. The U.S. citizen and University of Oklahoma alum founded Baring Vostok Capital Partners in 1994, investing nearly $3 billion into local companies — including an early bet in Yandex at a valuation of just $15 million (current market cap on the Nasdaq is $10.3 billion).

Where they stand: Now Calvey is in a Russian jail, as are three of his BVCP partners, on fraud charges related to what Western eyes would view as a civil shareholder dispute. More specifically, Calvey is being quarantined in a solitary cell, reportedly without any money in his "jail account" to even buy basic toiletries.

  • "The arrest of Michael Calvey sends two messages to foreign investors: The rules of the Russian business jungle apply even to those who do things by the book and neither foreign citizenship nor a stellar investment record are grounds for an exemption. The Kremlin appears happy to underline both," writes The Moscow Times.

What happened: BVCP in 2010 acquired a Russian consumer bank that soon fell on hard times, eventually merging with a fellow troubled lender led by a local investor known for his government ties.

  • Things soured quickly, with Calvey accusing the investor of asset-stripping his bank prior to the merger — including via a London legal action that's now in arbitration.
  • The Russian investor, via an associate, countered by arguing that BVCP artificially inflated the value of what it contributed to the merger; and it's that accusation that resulted in Calvey's criminal arrest. Seriously.
  • Calvey and BVCP deny any wrongdoing, and his fellow BVCP partners remain physically in Russia. This includes Elena Ivashentseva, who originally sourced the Yandex investment, and is now co-leading the firm on an interim basis alongside Alexei Kalinin.

The bottom line: Foreign direct investment in Russia had already fallen off a cliff, and this is basically throwing an anvil on top of it. Any outside investor who considered opening the next BVCP, or even a Russian satellite fund, will now wait to see the Calvey situation resolved.

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