Michael Calvey sits in a holding booth in the courtroom in Moscow on Friday. Calvey, founder and senior partner at Baring Vostok equity firm, was detained alongside two other fund managers. (Alexander Zemlianichenko/AP)

Michael Calvey, one of the most prominent U.S. investors based in Russia, faced fraud allegations in a Moscow courtroom on Friday in a case that could raise fresh doubts about the country’s ability to attract foreign capital.

Calvey, who was taken into custody, denied the fraud allegations in court and said he was ready to cooperate in the police investigation, according to Russian news agencies.

His private equity firm, Baring Vostok Capital Partners, said that Russian authorities had detained him and three other employees as a result of a shareholder dispute at a bank, Orient Express, in which the firm holds a stake. 

 A Moscow court notice showed Calvey had been detained on suspicion of “fraud carried out by an organized group.” Such a crime is punishable by up to 10 years in prison, according to the Russian criminal code.

It wasn’t clear whether political motivations also played a role in Calvey’s detention. He wasn’t known as a vocal critic of the government. In a sign of the significance of the case, two of the most prominent figures in Russian finance — the heads of the country’s sovereign-wealth fund and of its biggest bank — both spoke out in support of the U.S. investor on Friday. 

Calvey, who is 51, grew up in Oklahoma and founded Baring Vostok in Moscow in 1994. The company says it has invested $2.8 billion from North American pension funds and others into companies across the former Soviet Union. Calvey kept investing in Russia even as sanctions, official corruption and the sputtering economy scared away many Western companies.

Calvey is at least the third Westerner to face adverse action by Russia’s justice system in the past two months. American Paul Whelan was detained in December and later charged with espionage. His attorney said that Whelan, a former U.S. Marine, was given a flash drive that unbeknown to him contained a state secret, and that he maintains his innocence. 

Last week, Dennis Christensen, a Danish citizen, was sentenced to six years in prison for extremism for practicing as a Jehovah’s Witness. 

The State Department said it was “aware that a U.S citizen” had been arrested, but did not release any specific information on the case. The Kremlin said Russian President Vladi­mir Putin hadn’t been aware of the case against Calvey. 

In court Friday, a Russian investigator alleged that Calvey and the other suspects had embezzled more than 2.5 billion rubles, or more than $37.5 million, in a scheme related to Orient Express, according to Russian news agencies. Baring Vostok first bought a stake in the bank, which is based in Russia’s Far East, in 2010. 

“We have full confidence in the legality of our employees’ actions and will vigorously defend their rights,” Baring Vostok said in a statement.

Calvey’s detention jolted Moscow’s business community and threatened to derail efforts to attract capital from abroad. Foreign direct investment in Russia totaled about $29 billion in 2017, the most recent year for which World Bank figures are available, compared with $69 billion in 2013, before Russia’s relations with the West collapsed amid the Ukraine crisis the following year. 

Herman Gref, chief executive of state-owned Sberbank, said that he knew Calvey as a decent person and that he hoped his detention would turn out to stem from a misunderstanding. Kirill Dmitriev, head of Russia’s $10 billion sovereign wealth fund and also a close Putin ally, issued a statement describing Calvey as “committed to the highest ethical standards accepted in the investment community.”

“I believe that he has done a lot to attract foreign investment in Russia and helped many Russian companies to grow and mature,” Dmitriev said. 

Calvey was an early investor in Yandex, Russia’s Web-services giant. He backed other technology and consumer-oriented firms even as many other foreign investors in Russia focused on the country’s natural resources. In an interview, Derk Sauer, a Dutch publishing entrepreneur who heads the English-language Moscow Times, said it was “mind-boggling” that Calvey was detained. 

“The guy should earn a medal in this country — he has done so much good for this country,” said Sauer, who moved to Moscow in 1989. “It’s another huge blow to the confidence that Western investors have in this country.”

Calvey isn’t the first major foreign investor to be targeted by Russian authorities. Kremlin critic Bill Browder, a British co-founder of Russia-focused fund Hermitage Capital Management, was denied entry into the country in 2005. Hermitage lawyer Sergei Magnitsky died in Russian custody in 2009.

“The arrest of Mike Calvey in Moscow should be the final straw that Russia is an entirely corrupt and [uninvestable] country,” Browder said in a tweet. “Of all the people I knew in Moscow, Mike played by their rules, kept his head down and never criticized the government.”

In 2011, Calvey told The Washington Post that his firm was prepared to handle the vagaries of doing business in Russia. 

“International firms aren’t equipped for Russia,” Calvey said. “And they usually have a low tolerance threshold for uncertainty and no sense of humor for Russian surprises.”