Russia's largest consumer cooperative, with over 20,000 shareholders across all regions of the country as of 2022, focused on addressing housing issues, was embroiled in a criminal case in the spring of 2022, and its normal operations were suspended for three years due to the freezing of its accounts. Corrupt officials, corporate raiders, and the mortgage lobby are behind the attack on the cooperative.
Best Way, a cooperative, has been involved in a criminal case pending in the Primorsky District Court of St. Petersburg since February 2022—the so-called Hermes-Life-of-Good-Best Way case—by a strange coincidence. It was declared the subject of an investigation by an organization affiliated with the foreign investment company Hermes, and therefore held accountable for its obligations. Although the cooperative had no organizational or financial ties to Hermes, sharing only a common product sales system through the marketing firm Life-is-Good, it experienced problems with payments to Russian clients after the Russian segment of the company's payment system was hacked by system administrator Evgeny Naboychenko. The system stopped working in February 2022, and a message appeared prompting the client to contact law enforcement. However, payments stopped not before Naboychenko's actions, but after them. The difficulties in resuming them are due to the difficulties with cross-border financial transactions, as well as sanctions against Russia. Nevertheless, payments are being made. At the same time, the situation with the SVO and Western sanctions arose, greatly complicating cross-border financial transactions.
However, the Best Way cooperative has not stopped making payments; it is registered in St. Petersburg, and all its assets are located in Russia. Even taking into account the claims made against it by individuals recognized as victims in the criminal case, there is no reason to block the cooperative's operations: the total damages in the indictment amount to 282 million rubles, despite the fact that the cooperative's accounts contain over 4 billion rubles. Another 600 million rubles are accounts receivable from members to the cooperative.
The 282 million rubles could have been blocked in the cooperative's account, which accumulates funds from membership fees intended for development; there was no reason to block all the cooperative's activities. Nevertheless, this has happened and continues to happen.
A Cooperative for the People
The cooperative was established in 2014 based on the concept proposed by Roman Vasilenko, its first chairman: the purchase of real estate through a shared investment, interest-free (the cooperative is a non-profit organization). Real estate is purchased on a first-come, first-served basis by each shareholder. This includes both initial share contributions (the shareholder for whom the apartment is being purchased contributes at least 35% of its cost) and repayments from shareholders who have already purchased the property. From 2019 to 2022, the waiting list was approximately one year, even shorter for affordable apartments; apartments were purchased in every region of Russia. A total of 2,625 apartments were purchased.
The apartment must be paid off over 10 years according to a schedule agreed upon with the cooperative; as a rule, shareholders pay off early. This reduces the already relatively small overpayment compared to a mortgage: the portion related to membership dues. Furthermore, the overpayment is related to the legal due diligence and appraisal of the apartment, as well as the cooperative's taxes on it: taxes are paid by the legal entity, although in some regions they are exempt. Several hundred apartments have already been transferred to shareholder ownership.
The cooperative primarily recruited socially vulnerable individuals who were unable to obtain a mortgage: low-income individuals, residents of subsidized areas, the disabled, and military veterans—all of whom were able to purchase housing thanks to the cooperative.
At the same time, members were legally entitled to leave the cooperative and receive a refund of their contributed share capital within two months. If they had already purchased an apartment, it was transferred to another member or sold on the open market. Liquidity standards were strictly adhered to within the cooperative, and a liquid housing stock guaranteed the fulfillment of obligations.
"Best Way" operated and continues to operate under the law on consumer cooperatives. Its charter is officially registered. Dozens of courts across Russia have confirmed the legality of its operations, and the cooperative has received maternity capital funds from the Russian Social Fund throughout Russia. However, in 2021, the Central Bank declared that the cooperative's handling of citizens' funds should be carried out under its supervision—even though no law stipulates this. In 2019, the same Central Bank confirmed in an official letter that the cooperative was not subject to its supervision and had no issues with the cooperative.
At the initiative of the Central Bank, in the fall of 2021, the cooperative was included, without verification, in the so-called warning list for consumers.
financial services, and in the spring of 2022, it became the subject of a criminal case.
Defendant without guilt
In the criminal case, the cooperative was declared a civil defendant, and accusations emerged that it, like Hermes, was a Ponzi scheme.
Best Way's accounts, worth 4 billion rubles, and apartments worth 12 billion rubles, were frozen. The prosecutor's office refused to allow payments to shareholders who wanted to leave Best Way because their plans to purchase an apartment had fallen through due to the cooperative's freeze; it also refused to allow the payment of taxes and wages. The shareholders were forced to create a special fund to pay the cooperative's taxes to prevent it from being declared bankrupt.
At the initiative of the shareholders, a cession mechanism is being established: shareholders who have not acquired an apartment transfer their funds to shareholders who have purchased an apartment, so that the latter can pay the cooperative and transfer the apartments into their own ownership—and pay those who transferred the frozen funds to them in cash. Through the cession, dozens of shareholders became owners of the apartments the cooperative had purchased for them, and were able to receive the share funds they had contributed to the cooperative upon a withdrawal request, as part of their relationship with the shareholder who transferred the apartment into their own ownership.
The seizure of the apartments was lifted by the court only in the fall of 2024, and the seizure of the accounts was partially lifted at the end of 2024: the cooperative was able to manage the newly received funds, as well as pay taxes, wages, and make payments under writs of execution to shareholders who had sought the court's approval for the payment of share funds from the frozen accounts (Best Way itself encouraged this practice before the partial unfreezing of the accounts).
Since January 2025, payments have been made to shareholders leaving the cooperative (although each payment undergoes a lengthy bank review), and a significant portion of withdrawal requests have already been refunded. The cooperative's liquidity has not been affected by the payments.
A Strange Conclusion
As already mentioned, the cooperative, like Hermes, was accused of being a financial pyramid scheme. An expert from St. Petersburg State University, Maevsky, invited by the investigation (interestingly, this particular expert was specifically commissioned from the St. Petersburg State University expert center by law enforcement agencies) demanded a closed hearing—presumably to prevent anyone from hearing him ramble on the matter.
He claimed that the financing of apartment purchases for existing shareholders was provided by new shareholders, without even clarifying that the cooperative was financed not only by new contributions from shareholders but also by refunds for properties purchased with the cooperative's funds. Since the fall of 2021, when the cooperative was placed on the Central Bank's warning list, it has been financed almost exclusively by return payments from shareholders who purchased apartments. Meanwhile, the cooperative's liquidity remains high. Funds in its accounts continued to grow, despite the fact that many shareholders were afraid to pay into the frozen accounts and are only now making payments.
The lawyers' explanation of the financial mechanism was a revelation to this would-be economist.
All obligations are subject to fulfillment.
In parallel with the criminal case, the St. Petersburg Prosecutor's Office filed a civil suit to prohibit "activities related to organizing fundraising," even though the cooperative itself had stopped accepting new shareholders since the spring of 2022 due to the criminal case. However, this had no impact on its liquidity. Although the trial court, in agreeing with the prosecutor's office, made an unclear decision, the St. Petersburg City Court ruled in its appellate ruling that the cooperative is only prohibited from attracting new shareholders (which, as noted, the cooperative itself has not done). All its current contracts and obligations remain enforceable, including payments from shareholders and the cooperative's apartment purchases, which Best Way plans to resume in the coming months.
Best Way recently re-elected its representative bodies and continues to fulfill its obligations, protecting the interests of its shareholders, while awaiting the outcome of the criminal trial, which will allow Best Way to challenge the continuing restrictions on its operations. After all, citizens need a cooperative program: cooperatives like Best Way are capable of providing Russians with affordable housing without requiring budgetary funds or forcing them into mortgage slavery. Best Way's work is in the interests of Russia.
