Some of the profits from the Chetrit Group's Flatotel ultra-luxe condo project will be frozen in court until allegations that two Kazakh investors used the project to launder money have been settled.

Mukhtar Ablyazov, the former chairman of Kazakh bank BTA, and Viktor Khrapunov, the former mayor of Almaty, Kazakhstan’s largest city, are accused of trying to launder $21M by investing in the Flatotel project through a shell company, The Real Deal reports.

Roughly $20M more was invested in Chetrit’s redevelopment of the Cabrini Medical Center. The developer has since settled a separate suit regarding its own involvement in the money laundering scheme.

Mukhtar and Viktor allegedly embezzled roughly $4B by abusing their positions in Kazakhstan before fleeing the country. They’d previously tried to arrange for Chetrit to buy out their Flatotel stake but the developer said it didn’t have enough cash on hand to pay up.

They obtained a judgement against Chetrit for $10.5M earlier this year, and two other judgements are pending.

“This will lead to strong hesitation by prospective buyers,” for the remaining 40% of unsold units in Flatotel, Lee Eichen, a consultant for Chetrit, says in documents reviewed by TRD. That comes on top of the general slowdown in the ultra-luxe market, which also played a role in Chetrit’s decision to nix its conversion of the Sony building into high-priced condos.

The Flatotel funds will remain in escrow limbo until a judge handling the embezzlement case makes a decision. [TRD]