Donald Trump Owes $560 Million to Blackstone/Bayrock-Unproven!

Summary of eRumor:

President-elect Donald Trump owes $560 million to Blackstone/Bayrock, a so-called collective of Russian oligarchs that have heavy sway over the Russian government and Vladimir Putin.

The Truth:

Claims that Donald Trump owes $560 million to Blackstone/Bayrock have been circulating for weeks on social media, but we couldn’t find any documentation about how much, if anything, Trump owes those firms.

Any claims about Donald Trump’s net worth, income or debt can’t be verified because Trump hasn’t released his tax returns.

It’s not clear where, exactly, the claim that Donald Trump owes $560 million to Blackstone/Bayrock started — but it appears frequently in the comment sections of social media posts and articles about Russian hacking, Donald Trump and the 2016 election. The post cites a number of sources, but none of them include any specific claims about Trump owing Blackstone/Bayrock $560, or any money at all.

Rather, the source articles detail Trump’s relationships with Blackstone Group LP and Bayrock Group LLC, and those firm’s relationships with Russian investors and government officials. And, although there’s nothing in those articles (or anywhere else on the web) to support the claim that Donald Trump owes Blackston/Bayrock $560 million — we’ll provide a little background on what’s known about Trump’s dealings with the firms and their Russian connections.

Is Donald Trump in Debt to Blackstone?

Donald Trump is closely connected to Blackstone cofounder, chairman and CEO Stephen Schwarzman, and Schwarman has had dealings with Russian government officials in the past.

Schwarzman cofounded Blackstone in 1985 and today it has offices located around the globe — including China, Hong Kong, India and Dubai — and manages more than $360 billion in assets. In 2011, Vladimir Putin appealed directly to Blackstone to invest in Russia, Reuters reports:

The May 18 gathering was a radical departure for Putin, who normally receives foreign executives when they seek his personal blessing to close multibillion-dollar deals.

Speaking through an interpreter to guests including Blackstone’s Stephen Schwarzman and Abu Dhabi’s Hareb Al Darmaki, he spelled out how the fund would work alongside foreign investors to buy businesses in Russia.

By 2014, Blackstone announced that it was “giving up on Russia” after its invasion of Ukraine resulted in a new round of sanctions, the Moscow Times reports:

U.S. and European sanctions against state-backed Russian companies to punish Moscow for its intervention in Ukraine are deterring Western investment.

Blackstone’s decision was also prompted by the fact that it had not found suitable investment opportunities in the past three years.

In January 2016, however, the New York Times reported that Schwarzman sat on the board of international advisors for an investment fund backed by the Russian government and directly linked to Vladimir Putin from 2011-2014:

Mr. Medvedev wanted to attract overseas investors to the country’s companies, and tried to entice them by matching state funds with private capital. The partnership with the state, the theory went, would reduce the investors’ worries about the risk of nationalization and arbitrary regulation.

To further shore up support, the fund rounded up prominent investors to serve on the advisory board. Along with the TPG and Blackstone executives, the fund recruited Leon Black of Apollo Global Management; Richard M. Daley, the former mayor of Chicago; Kurt Björklund of Permira; and Chinese and Middle Eastern fund managers.

By lending their names to the fund’s advisory board, these financial heavyweights were supposed to ensure that money did not flow to political pet projects. The first wave of deals focused on bread-and-butter investments in companies building out Russia’s infrastructure and catering to the middle class.

Today, Trump remains closely connected to Schwarzman. In December 2016, Trump appointed Blackstone’s CEO and cofounder to serve on the President’s Strategic and Policy Forum, which will be “called upon to meet with the president frequently to share their specific experience and knowledge as the president implements his plan.”

In the end, Trump has strong connections to Blackstone, and Blackstone executives have had business dealings with the Kremlin — but we couldn’t find any direct proof that Trump is currently in debt to Blackstone, or even that it’s connected to Russia today.

Is Donald Trump in Debt to Bayrock?

We couldn’t find any public records detailing how much, if at all, Donald Trump and the Trump Organization are currently in debt to Bayrock Group LLC.

But Trump’s dealings with the New York-based real estate development firm have been well documented over the years. Bayrock has backed Trump projects around the world. Perhaps most notably, Bayrock was the primary backer of the the $370 million Trump SoHo luxury condo development that was completed in 2008.

Trump SoHo has become a confusing, tangled web. Not surprisingly, it’s also been the subject of a number of lawsuits that have shed light on its financing — which is how it relates to the Donald Trump owes Blackstone/Bayrock $560 million claim.

First, Trump SoHo condo buyers filed suit claiming that they had been “defrauded by inflated claims made by Mr. Trump, his children and others of brisk sales in the struggling project” to create a false sense of urgency and force sales. Trump settled the suit in 2011, agreeing to refund 90 percent of original deposits, assuming no guilt, the New York Times reports.

A second lawsuit filed by Bayrock finance chief Jody Kriss alleged that funding for Trump SoHo and other Trump-Bayrock projects arrived “magically” from sources in Russia and Kazakhstan. The lawsuit also alleged that “tax evasion and money-laundering are the core of Bayrock’s business model.”

Questions about Bayrock’s involvement with the Trump Organization quickly circled back to the development firm’s principal players, Tevfik Arif and Felix Sater. Arif is the Kazakh real estate developer and investor who founded Bayrock Rock. Sater, a native of Russia, had mafia ties and became a government informant after a “pump and dump” stock scheme. Stater has testified that he represented Trump in Russia, billed himself as a senior Trump advisor, and had an office in Trump Tower, Forbes reports.

In 2011, Trump testified about his dealings with Bayrock, and his knowledge of Russian investors, the Times reports:

Emails and testimony in several lawsuits show that Mr. Sater and Mr. Arif worked closely with Mr. Trump and others in the Trump Organization. Mr. Trump was particularly taken with Mr. Arif’s overseas connections. In a deposition, Mr. Trump said that the two had discussed “numerous deals all over the world” and that Mr. Arif had brought potential Russian investors to Mr. Trump’s office to meet him.

“Bayrock knew the people, knew the investors, and in some cases I believe they were friends of Mr. Arif,” Mr. Trump said. “And this was going to be Trump International Hotel and Tower Moscow, Kiev, Istanbul, etc., Poland, Warsaw.”

What sort of due diligence Mr. Trump did before jumping in with his new partners is unclear. But he, as well as many others, apparently missed some dark spots on Mr. Sater’s résumé. Mr. Garten said the Trump Organization typically did a background check on potential business partners like Bayrock, but not on their individual employees, so nothing about Mr. Sater would have turned up.

In the end, it’s clear that Donald Trump had a close business relationship with Bayrock, which relied on investors from Kazakhstan and Russia to finance Trump projects. But specific claims about how much Trump is in debt to Bayrock — if at all — can’t be proven because that information hasn’t been made public.

That’s why we’re calling claims that Donald Trump owes Blackstone/Bayrock $560 million”unproven” at this time.

A real example of the eRumor as it has appeared on the Internet:

Trump owes Blackstone/Bayrock $560 million
The first in a long list of claims, that Donald Trump owes Blackstone/Bayrock $560 million, can’t be proven.