A Moscow court sentenced Russia’s most famous fund manager Michael Calvey to a 5.5-year suspended sentence for embezzlement, a day after finding him guilty, in a closely watched trial that will hurt Russia’s investment climate.  

Calvey is Russia’s most successful private equity investor and made billions of dollars for his LPs with several early investments into several of Russia’s household names. The founder of Russia-focused private equity group Baring Vostok, Calvey was arrested in February 2019 with half a dozen other executives on charges of embezzlement linked to mid-sized lender Vostochny after he clashed with his Russian partners in the bank.  

The case was widely seen as engineered by Artem Avetisyan, who was a co-investor and has close ties to the Kremlin and the Federal Security Service (FSB). During the course of the trial even the judge admitted that no real evidence of Calvey’s guilt was presented and claimed the lack of evidence was “proof of how good they are in covering up their wrong doing.”  

"The court, unfortunately, didn't or couldn't understand substance of the case with no victim, no damage and no beneficiary," Calvey told reporters outside the court after the more than 12-hour-long sitting was over.  

The original embezzlement charge became moot after Baring Vostok decided to settle with Avetisyan in October and pay the disputed RUB2.5bn ($31.8mn), a tiny fraction of the money the fund has under management.  

Calvey has been holding out for an acquittal and told the court that if his name was cleared “billions of dollars will flow into Russia”. International foreign investors have held back investments into Russia since Calvey’s arrest, waiting to see the outcome of the trial that has badly undermined confidence into private equity investments into Russia. But as courts convict 99% of the cases that are brought to trial it was always seen as unlikely that Calvey would be acquitted.  

In what is widely seen as a face saving compromise, the prosecutors only asked for a six-year suspended sentence, which the judge reduced slightly to 5.5 years so Calvey will not serve any more jail time, after being held on remand for several months, before he was released to house arrest.  

But the suspended sentence comes with various conditions and restrictions. Calvey will have to meet with a parole office once a month and is not allowed to change his permanent place of residence in the next five years without informing Russian prison authorities, the verdict said. He also has to ask for permission to leave the country. Similar conditions were imposed on jailed anti-corruption activist and opposition politician Alexei Navalny, who broke his parole conditions when he missed meetings with his parole office while he was being treated for Novichok poisoning in a Berlin hospital last year. Navalny is now serving a two and half year sentence for those violations.  

"Compared to most cases receiving a suspended sentence is already almost a victory but, on the other hand, it is simply outrageous to be convicted of a crime that never happened," Calvey said as cited by Reuters.  

The court also handed French national Philippe Delpal, a partner at the fund, a suspended sentence of 4.5 years.  

"Our colleagues are innocent, and both the criminal case and the verdict handed down by the court are groundless," Baring Vostok said about the verdict in a statement.  

Sovcombank, Russia's third biggest private bank and among the country's top 10 by assets, agreed to buy Vostochny Bank, the small lender at the heart of the dispute, in March, but did not disclose financial terms of the deal.  

Baring Vostok has invested more than $2.8bn in projects in Russia since 1994, including in internet giant Yandex, online bank Tinkoff and e-commerce firm Ozon, which enjoyed a successful Nasdaq debut late last year.