The warring conmen at the heart of a €5bn carbon credit scam

This time was different. The cops came straight into the house. There were a dozen of them, wearing bulletproof vests. They took him outside in handcuffs and put him in a car. Maybe he was paranoid, having built a multimillion-dollar empire on fraud and deceit, nurturing connections with international criminal rings, but at first he thought he was being kidnapped. When he saw the jail, he was relieved. 

The feeling was short-lived. The jail was cleaner than those in Europe where he had been held before, but after a couple of hours he demanded a cigarette and was informed that smoking was prohibited. OK, he thought. There must be a way. There’s always a way. He would find the right people, negotiate the right conditions. He had to smoke. He loved to smoke. He loved it more than anything, except for women. He loved women! And smoking, and art and shopping.

He found someone in the prison whom everyone called El Gordo – a Mexican guy who could hook people up with anything. Daphne asked for cigarettes and he was told that he would need to have $300 delivered to an address on the outside. This was not a problem. Daphne’s mansion had once belonged to a silent film star; he sometimes commuted by helicopter. There wasn’t much he couldn’t afford. After his cousin had dropped off the cash on his behalf, Daphne went back to El Gordo to collect his cigarettes. El Gordo looked at him, then gave him a nicotine patch. “No smoking in prison,” El Gordo said. 

Daphne was eventually extradited to Europe to face money-laundering charges and sent to a prison in France, where he could get anything he wanted: magazines, special meals, the Israeli cigarettes he preferred. His lawyer could also bring him things. So when he saw a segment on TV about climate-change policy, he asked his lawyer to bring him more information about France’s plans to reduce emissions. Daphne had a preternatural ability to sniff out criminal prospects, and he had caught a familiar whiff.

When Daphne read the materials his lawyer provided him, he learned about Europe’s carbon-emissions trading system, the first of its kind in the world. It had grown out of the Kyoto protocol, the landmark international agreement to reduce global emissions. Sure enough, Daphne told me, he saw the blueprint for what would become his next illicit enterprise. As soon as he finished his time in prison, he began gaming the new emissions-trading system.

The scam would help Daphne accumulate even more money, and it would make him famous. In the media he cut a dashing figure, partying with celebrities and oligarchs. He maintained his slim physique and dressed in blazers cut frommade of blue velvet or embroidered with shimmering brocade flowers. He was rarely photographed without one of his hundreds of pairs of Tom Ford sunglasses. Always, it seemed, he had a cigarette hanging out of the side of his mouth. 

Reporters dubbed Daphne the “Prince of Carbon”, but it wasn’t just his flamboyant charisma that elevated him to criminal royalty. So, too, did the nature of his new fraud. Daphne was scamming the fight against the climate emergency by exploiting a policy flaw that left billions for the taking.

I should say here that Gustav Daphne is a pseudonym. He remains a wanted man in France, so when I travelled to meet with him at his gated villa in Tel Aviv, he agreed to speak on the condition that I not use his name – any of his names. (He has a few aliases.) Still, his name is all over the French media. I warned him that a pseudonym would be a pretty weak shield for his identity. That was OK with him.

During my visit, Daphne took calls from his lawyers and asked favours of his wife and flirted with acquaint­ances over WhatsApp. He wore his Tom Ford sunglasses indoors and out. He showed me his art: a large Kandinsky painting in the foyer, a few Chagalls downstairs. The villa had some burly guys on staff and a cleaner from Sri Lanka who picked up after two fluffy indoor dogs that liked to avail themselves of the plush white carpets.

All this is part of Daphne’s downsized lifestyle. He used to have a bigger mansion, with a swimming pool and a tennis court, a gym and a movie theatre. He has fashioned a new life for himself in Israel, which has yet to grant France’s request for his extradition.

Daphne and other scammers’ pillaging of Europe’s carbon market constitutes what the media have called “the fraud of the century” – billions of euros were stolen in a matter of months. The shadowy scheme attracted established crime rings and amateur hucksters alike, many of whom knew one another. Its web reached the boxing rings of Las Vegas, the offices of Germany’s biggest bank, the caves along the border of Afghanistan and Pakistan where Osama bin Laden was hiding and the gilded restaurants of Paris. It pulled in a playboy demi-celebrity, an Afghan refugee, a flashy street hustler, an immaculate businessman who hobnobbed with the queen of England, the doyenne of Marseille’s underground and a man some people called The Brain.

The Brain’s real name is Grégory Zaoui, and he claims that the entire scam was his idea. Daphne, he says, gets far too much credit for his role in ripping off the carbon market.

Zaoui is stout and broad-chinned, with thick eyebrows and a sweep of dark hair. When he was involved in the carbon scam, he took pains to remain under­stated. He favoured dress shirts in pale blue or white. Even when he was photographed alongside some of the highest-ranking politicians in France, he looked withdrawn. When he spent money, he did it quietly. Journalists described him as discreet, cerebral, analytical. Even though they grew up a few miles from each other, Daphne and Zaoui couldn’t be more different.

When Zaoui was questioned by the police, 15 years ago now, he said he’d been betrayed. He had gone into business with the wrong person, he claimed. Someone he had once considered among his closest friends double-crossed him so wickedly that he never really reaped the rewards he deserved for being a carbon fraudster. 

Zaoui agreed to meet me in Paris last May, at a restaurant in one of the city’s most luxurious hotels, the Lutetia, where a Coca-Cola costs €12 and an army of valets swarm the entrance. He wanted to set the record straight about his and Daphne’s respective roles in Europe’s carbon fraud. Until now, he told me, no one had truly understood the relationship between them.

“He is the prince,” Zaoui told me. “But I am the king.”

Daphne’s parents moved from Algeria to a village one hour outside Paris in 1962, at the end of the Algerian war of independence. In the 1990s, living in Paris, he got a job at an insurance brokerage. He worked hard. He identified groups of people who needed coverage they weren’t getting elsewhere and made them offers. He was charming, persuasive. “People adopt me very easily,” Daphne told me. He can’t go to therapy, he said, because therapists have a bad habit of falling in love with him.

Daphne struck out on his own and opened insurance offices in Paris and Bordeaux. Things were going well, not outlandishly so, but his family was comfortable. Then one day some new clients walked through the door. They wanted to insure their lavish apartments and their fleets of luxury cars. Daphne drew up their policies, and soon he was going with them on vacation, lounging on their yachts. He claims to have had no idea they were part of the international cocaine trade. He was just a man selling insurance and enjoying a little respite with his clients when he could get it.

As Daphne tells it, he was minding his own business when law enforcement came for him. He was accused of providing the traffickers with insurance certificates for items that weren’t covered by real policies and given a three-year sentence. While proceedings were still under way, he lost all his clients and his company fell apart. He swears that he was innocent, that the certificates had come from someone else, yet the government blew up his whole life. He wasn’t even 30.

A little more than 30 miles east of Daphne’s childhood home, in a rough neighbourhood on the outskirts of Paris, Grégory Zaoui was also born into an immigrant family – in his case, Algerian Tunisian. In his late teens, Zaoui began importing jeans and got into the game of VAT fraud.

In 1996, he got caught, and went to prison for a month, but after he got out, he was soon back in the game. He linked up with two brothers who brought him into their business skimming tax on imported mobile phones. Before long, Zaoui was making as much as 100m francs (£12.9m) a month. In 2004, the authorities caught up with that scam and sentenced him to three years in prison. He appealed and was granted bail of €75,000, but all his money was tied up overseas and he couldn’t pay it. By then he had three young children at home. In early December, just as Hanukkah was beginning and it looked like Zaoui would have to spend the holiday in a prison cell, his mother visited him with good news. “Be happy,” she said. “Your friend, he knew you had to get out, so he brought us a cashier’s check for €75,000. Soon you’ll be out.” That night he dined at home, lit the first candle of the menorah, and played with his children. 

Zaoui never forgot the generosity of the man who lent him cash. Kévin El Ghazouani was a buddy of his wife’s cousin; they had bonded previously over a shared passion for cars. By coming through so unexpectedly, the man secured a place in Zaoui’s heart. Zaoui promised that one day he would repay him.

The groundwork for their participation in carbon fraud was laid behind bars. While Zaoui was waiting for bail money, he shared a cell with a man who installed solar panels in the south of France. The man told Zaoui to get out of mobile phones; the future was in businesses that protected the environment. Solar panels, heat pumps, geothermal energy.

By the time he was released, Zaoui was convinced it was worth a try. He started his own solar-panel installation company. He went to trade shows. At one of them, in 2005, he learned about Europe’s new emissions-trading system.

For a certain, highly influential, school of economists, the whole problem with the environment – the reason there’s air pollution and shitty water and pesticide contamination and industrial runoff – is that these things aren’t priced into any market. So when it started to become clear that climate breakdown constituted a global crisis, economists proposed creating markets for emissions. In the 90s, Europeans were adamantly against the idea; they wanted industries to be taxed directly for what they pumped into the environment. But in meetings leading up to the Kyoto protocol, American negotiators championed a suite of so-called flexible mechanisms, including carbon markets, and prevailed. (The US then refused to ratify the agreement.) European policymakers came around and created what’s known as a cap-and-trade system, which would eventually cover nearly half the emissions in the EU, including those produced by the energy sector, manufacturing and airline travel. 

The way the system was supposed to work was simple enough: the EU would set an annual cap on its overall emissions, then issue various emitters a certain number of EU allowances (EUAs). Each EUA would entitle its holder to emit one tonne of carbon. If a company had extra EUAs at the end of the year, meaning that it hadn’t emitted all the carbon it was allowed, it could put them up for sale, and companies that had too few EUAs could buy them. Companies could also purchase carbon offsets, which basically meant investing in sustainability measures in other countries. The plan was for Europe to issue fewer EUAs year over year, so it would become progressively more expensive to emit carbon.

What made the market interesting to scammers was the potential for VAT fraud. To understand the scheme they cooked up, it’s important to know two things: because economic policies in Europe are aimed at facilitating trade across borders, VAT is waived on sales between EU member states. Also, since governments only want to tax the value added at each stage of the economic process, they credit or reimburse the buyers of certain products for the VAT paid to suppliers.

VAT fraud has existed since the inception of Europe’s tax system. Mobile phones were once popular targets. Criminals imported phones from other EU countries, sold them to consumers with VAT tacked on, pocketed the tax, and disappeared. Or they used so-called carousel schemes, pretending to sell phones through a chain of businesses and requesting VAT reimbursements from governments at each point of sale. According to European law enforcement, VAT fraud involving mobile phones alone has siphoned billions of euros away from public budgets. In some cases, VAT scammers dealt in fake goods: the only things that were real about their schemes were the fleets of empty vans driven around to generate sham import and export records.

The carbon market presented an unprecedented opportunity for VAT fraudsters. An EU Allowance was just a serial number on a computer. It could be transferred with the push of a button, and it could be bought and sold by anyone – companies in carbon-heavy industries, as well as traders and bankers speculating on price fluctuations for EUAs.

One day in 2006, shortly after the carbon market debuted, Zaoui picked up the phone and called the headquarters of Powernext, a trading platform in Paris. The volume of EUA sales was basically nil at the time. Regulators had issued too many allowances, which made them almost worthless. Still, Zaoui saw promise.

Every time an allowance changed hands in France, the seller was supposed to collect VAT. Because there was no value added in the process, the buyer would get a VAT reimbursement. To defraud the system, then, someone could set up a carousel: buy EUAs VAT-free from outside France, sell them on Powernext with VAT tacked on, and get reimbursed.

Unlike VAT fraud with mobile phones, no empty vans were required. The carbon market rendered even the pretence of real-world trade unnecessary because its product was an absence, an unemitted tonne of gas. All someone needed to exploit the system was a good internet connection that allowed them to make trade after trade among the entities in their carousel. As one scammer told me: “It was easier than sending an email.” 

While in prison in France, Daphne learned about the carbon market. Daphne told me that he was initially interested in a different programme born of the Kyoto protocol. Called Redd, it allowed polluters in developed countries to offset carbon emissions by paying developing countries not to cut down trees. Like the carbon market, Redd relied on nonexistent products – essentially, pledges to leave forests and their stores of carbon untouched. But how to verify that these pledges were serious, or to measure their success? In truth, many people didn’t care. The whole thing relied on an attractive idea, and scrutinising it too closely threatened to upend it. “So much bullshit,” Daphne said.

But what was bad for the planet was good for him. He plotted out his new scam. He kept the front companies from his mobile phone scheme alive, paying roughly €10,000 a month to compensate each of the straw managers that owned them on paper. When he saw that the companies might be useful in exploiting climate-change mitigation products, including EUAs, he made some inquiries. “A few months before I was released, I talked to this guy,” Daphne said. He wouldn’t say the man’s name on the record. “I told him about the companies, and we talked about the EUAs, the Kyoto protocol and everything.”

They agreed to work together, and Daphne’s new partner hired some accountants and registered three companies on Powernext. But these weren’t Daphne’s old fronts.

“What were the three companies?” I asked him.

“Alors, now we have a problem,” he replied. Because they were companies that Grégory Zaoui claimed were his.

Once Zaoui had confirmed that the EUAs were subject to VAT, he made an experimental trade, buying €30,000 of VAT-free EUAs from the Netherlands, then selling them with VAT included. It worked exactly as he had hoped. Just like that, he was €6,000 richer. He couldn’t believe how easy it was – and how dumb. “How did they come up with this stupid idea of applying a VAT on an asset that is immaterial?” Zaoui remembers thinking.

Now all he needed was a backer, someone whose money he could use to buy the allowances necessary to get the whole scheme rolling. Zaoui knew that his plan was a guaranteed moneymaker, so he figured he would be doing a favour to anyone he went into business with. He remembered the man who had bailed him out of jail, Kévin El Ghazouani. “I’m going to bring you something where you’re going to make more money than you’ve ever made in your life,” Zaoui told him. “But at the outset, you have to invest a few hundred thousand euros.”

According to Zaoui, El Ghazouani came over to his office, on a quiet avenue near the Champs-Élysées, to talk. Zaoui told him that they would have to be patient, like crocodiles waiting for their prey. In 2008, the EU would issue fewer carbon allowances, driving EUA prices up and finally creating more trading volume. When that happened, Zaoui would use one of the companies he already owned as his main front. “And then, tac!” Zaoui said. He slapped his hands together like a crocodile’s jaw. 

El Ghazouani thought about it for a few days, then came back to Zaoui’s office. “Here’s my proposal,” he said, according to Zaoui. (El Ghazouani didn’t respond to my requests for comment, and his lawyer declined to talk.) El Ghazouani didn’t want to become a partner with Zaoui in his company; he wanted to use other companies. According to Zaoui, El Ghazouani had already created four, including one called Crépuscule.

Zaoui and El Ghazouani agreed to split the profits evenly, and got to work. Zaoui told me that they established one new trading company together and made Crépuscule a brokerage that could trade directly and make trades on behalf of the other entities on the Powernext platform. Their companies were registered in France and abroad, allowing the men to take advantage of VAT-free cross-border trades. El Ghazouani recruited people to “lead” the companies, poor guys from the suburbs of Paris who would agree without hesitation to put their name on a piece of paper in exchange for a chunk of money.

In the spring and early summer of 2007, before they had even started making trades, Zaoui and El Ghazouani would meet up in the morning and go to a cybercafe or a McDonald’s with free wifi – Zaoui told me they wanted to work from public IP addresses that couldn’t be linked to them. To make their businesses seem legitimate, they logged on to Powernext every day and sent emails from company addresses.

One day, Zaoui was headed home on his motorcycle when he saw a woman walking in the same direction he was riding. As he passed her, he turned to catch a glimpse of her face and saw that it was a woman he had known in his adolescence. Her name was Chirelle, and they’d had a fling on the beach one summer when he was a teenager.

Zaoui circled the block on his motorcycle, stopped next to Chirelle, and took off his helmet. She recognised him right away. They went for dinner, and when he got home that night Zaoui knew that he wanted to spoil Chirelle like no man had ever spoiled a woman. He bought her a Bugatti in green, like her eyes. When she asked him what he did for work, he replied, “I work for the protection of the environment.”

It was late summer 2007 when everything changed. Zaoui and El Ghazouani had been seeing less of each other, meeting only once a week or so. One morning, Zaoui tried to log on to the accounts of one of their firms. He got a message saying his password was incorrect. He tried a second time, and when it failed again, he became suspicious. He called El Ghazouani. “What’s going on?” he asked.

They agreed to speak in person. According to Zaoui, at the meeting El Ghazouani divulged that he had overinvested. “I’m up to €300,000,” he said. “I can’t keep it up any more.” Without telling Zaoui, El Ghazouani had made a deal with someone else, giving them control of the companies. He made it sound as if he needed the money the deal would generate so badly that he didn’t have a choice. 

Zaoui found it all baffling. If they had just waited until the carbon market picked up, they would have made a fortune. Zaoui demanded a cut of what El Ghazouani said he had netted from offloading the companies. Eventually, El Ghazouani paid him €80,000.

Losing the companies was a major setback, but Zaoui tried to focus on the road ahead. He wanted to register a new brokerage that would only make deals for other trading companies. In the event that other scammers began defrauding the carbon market – something Zaoui was confident would happen – he would offer his brokerage’s trading services for a commission.

The problem was that he lacked capital. He wanted investors, people who were serious about his vision. Zaoui reached out to people who had money at their disposal. One of them was Daphne.

The two men knew each other in passing from the world of mobile phone VAT fraud. They moved in the same circles, knew the same people. El Ghazouani had talked to Zaoui about Daphne, rhapsodising about his business acumen.

By the time Zaoui called Daphne, it was early 2008. Daphne had got out of prison on parole and fled France, returning to Israel. According to Daphne, Zaoui said on the phone that he had “found something amazing”, but Daphne told him that he had retired from scamming. Zaoui pressed him: “It’s really amazing. I need €2m, please. Just trust me.” Daphne remained a firm no.

Undeterred, Zaoui kept looking for funding. He eventually borrowed money from an acquaintance, which he used to found a company called Coer2 Commodities. As he predicted, the carbon market grew. In fact, it exploded. The average trading volume in late 2008 was less than 2m allowances a day. By June 2009, it was hitting 20m. Many of these trades happened on BlueNext, which succeeded Powernext in 2007 and grew to become the continent’s largest carbon exchange.

Broadly speaking, the value of the global carbon market more than doubled between 2007 and 2009, reaching $144bn. Amid a worldwide financial crisis, it seemed as though EUAs offered a haven in a global minefield of bad investments. “Unlike other markets, the carbon market hasn’t collapsed despite the fact that carbon as an asset is still somewhere between infancy and childhood,” Yvo de Boer, the executive secretary for the United Nations Framework Convention on Climate Change, said in March 2009.

What politicians had yet to realise was that the market was rife with fraud. As word spread through criminal networks about the easy money to be made from allowances, scammers all over Europe – and in some cases outside it – flocked to carbon-trading platforms. One of Zaoui’s old business partners did, too, bringing along a glamorous Parisian playboy named Arnaud Mimran, who was later convicted of a kidnapping related to his carbon dealings. Many fraudsters sought relationships with big banks that could broker trades on carbon exchanges. Mohammad Safdar Gohir, a British man who submitted more than €100m in VAT-reimbursement claims to German authorities, called his contact at Deutsche Bank his “golden goose”. Some scammers funnelled their spoils into terrorism; evidence of profits from a VAT scheme were found in a cave once occupied by Osama bin Laden.

In Zaoui’s view, some of the newcomers were sloppy. He made sure that his new brokerage was above board, at least on paper. By poaching traders and bankers from serious financial firms, he manufactured a veneer of respectability; many of his employees had no idea he was involved in fraud. His firm expanded to include legitimate trading in crude-oil futures, gold, natural gas and metals. Its analysts gave quotes to news agencies like Reuters. Zaoui told me that he made €80,000 to €100,000 a day from legal business alone.

Meanwhile, he was quietly doing what he had long plotted: taking commissions from companies that used his brokerage’s services to skim VAT from carbon trades. Zaoui estimated that he made hundreds of millions of euros from his illicit business. “I made a colossal profit as a broker, and what I did behind the scenes, nobody knew,” Zaoui told me. “The best way to go unnoticed is to be noticed. Like Goebbels said, ‘The bigger the lie, the more people believe it.’”

In the summer of 2008, Zaoui got a call from Igal Abikzer, the man who had first introduced him to Kévin El Ghazouani. “You know El Ghazouani is making a mockery of you,” Abikzer told Zaoui, according to legal documents. 

Abikzer proceeded to share what he knew: El Ghazouani never offloaded the companies he ran with Zaoui. He retained control of the firms, including Crépuscule, so that he could run the VAT scam that Zaoui claimed was his idea. El Ghazouani had dumped Zaoui and was now in cahoots with Gustav Daphne. “Everyone in Israel knows,” Abikzer said.

Abikzer had also heard that El Ghazouani was going around making fun of Zaoui for his misplaced trust, his naivety. For Zaoui, the betrayal was grating. So was the revelation that Daphne had lied to him about being retired from scamming.

But there were other things that Zaoui didn’t know. Daphne told me that when Zaoui asked him for money in 2008, he had already set up a small apartment as an office in Tel Aviv and recruited a team of guys he knew to orchestrate carbon trades and funnel the stolen VAT to overseas accounts. Daphne was also using at least some of the companies Zaoui thought only he and El Ghazouani were running. “He was calling me, but he didn’t know I was already in,” Daphne said of Zaoui. “My God, they are so stupid, these guys.”

Daphne claimed that Crépuscule was his company from the start – something that, as far as I knew, he had never said publicly before. He told me that he established it long before carbon fraud was even possible; he initially used it to steal VAT from phone sales. Daphne still wouldn’t give me the name of the friend he went into business with while he was in prison, but based on what he was saying about Crépuscule, the man had to be El Ghazouani. And if Daphne and El Ghazouani were scheming together all along, that meant an unwitting Zaoui was working for Daphne when he set up Crépuscule as a brokerage on Powernext.

Zaoui suspected that El Ghazouani had betrayed him out of greed: Daphne had more money than Zaoui did, and a bigger profile in the fraud world. As for Daphne, Zaoui developed a different theory about his motives. “I was always with beautiful women, I had beautiful cars, I was with people in the artistic world. I didn’t hang out with thugs,” Zaoui told me. “I was naturally brilliant and it pissed him off. And then he stole from me.”

Zaoui said that once he learned the truth, he vowed to avoid doing deals with companies linked to Daphne and El Ghazouani. It’s a war, he told himself. But as the carbon market ballooned, it became increasingly difficult to discern who was connected to what.

In the autumn of 2008, Zaoui confronted El Ghazouani in Paris. Any lingering affection Zaoui had for El Ghazouani was long gone. He was furious. “Listen, I know what you’ve done,” Zaoui said. “It’s a shame, because we could have made a lot of money.”

The first entity in Europe to sound the alarm on carbon fraud seems to have been the CDC, France’s state-owned bank. It was releasing millions of euros in VAT reimbursements to bank accounts set up in countries that weren’t signatories to the Kyoto protocol, and its employees got suspicious. According to Marius-Cristian Frunza, a prominent VAT-fraud expert, between October 2008 and the following June, the CDC sent 13 statements of concern about 35 companies to Tracfin, the French government agency that analyses financial data for fraud. During the same time period, BlueNext, the carbon exchange, sent at least nine additional alerts. 

Tracfin decided to take the matter to the customs police, who began to tease apart the carbon market’s layers of shell companies and straw managers, preparing cases they could take to court.

By June 2009, French authorities realised that VAT fraud was rampant. At a loss for what else to do, they announced that EUAs would be exempt from VAT, and they shut down carbon trading for two days. France’s carbon market crashed.

When the French accounting office tallied how much money VAT fraudsters had stolen, it came to €1.6bn. Among the worst offenders were the people behind Crépuscule. Data put together by Frunza shows that the company made trades amounting to 65m tonnes’ worth of carbon – the same volume moved by financial giants Société General and Deutsche Bank, representing half the allowances distributed to French industries. All told, Crépuscule’s trades were worth €827m, and prosecutors would soon claim that those same trades had been used to pilfer €150m in VAT.

On 8 December 2009, the police came to Zaoui’s apartment in Paris. He immediately knew who was on the other side of the door. A few days into custody, when Zaoui had a chance to review the files in the case against him, he realised that he was being investigated for Crépuscule’s crimes. The police had connected him to the company through phone taps related to mobile phone VAT fraud, but El Ghazouani had also been picked up for interrogation, and Zaoui believed his ex-friend had given the police his name and intimated that he was the brain behind the entire operation. Zaoui was pissed off. Why should he be held accountable for wcrimes committed by a company that, in his view, had been stolen out from under him?

In prison, Zaoui could only shower three times a week, and the cell he shared with three other men was tiny, less than 100 sq ft. One of the men, also suspected of being a carbon scammer, knew Daphne. Zaoui asked the man if he had a phone number for Daphne, and one Friday night Zaoui called him.

“Listen to me,” he told Daphne. “I’m not asking you for money to pay my lawyers or anything. I’m in this situation where this case isn’t mine, and you know that very well. You took the companies over through Kévin [El Ghazouani]. Now Kévin is blaming everything on me.”

Daphne was silent.

“I am just asking you for one thing,” Zaoui said. “Get me out of here. Tell me the story I need to tell. A name, something to get me out.”

What Daphne heard was a threat: if someone else didn’t come forward and take the fall for Crépuscule, Zaoui was going to tell law enforcement everything he knew.

“Ah, OK, Grégory Zaoui. I’ll call you back,” Daphne said lightly. Zaoui had contacted him on a phone registered in Daphne’s legal name. After hanging up, Daphne grabbed one of his other phones, a burner, and called Zaoui back.

“Listen, you son of a bitch. First of all, you call me from jail? It’s not very nice,” said Daphne. “Second of all, you can go as far as you want. If you want to push, I can find a lot of things against you beyond this case. So cool down.”

But Zaoui didn’t back off. He was miserable in prison. The only thing that could keep his spirits up was Chirelle’s visits. She made him laugh and forget where he was. They had sex surreptitiously in the visiting room. A few months into his detention, they found out that she was pregnant, a miracle baby. Zaoui had to get out of prison.

During another interrogation, Zaoui told the police about how El Ghazouani had betrayed him. He also gave the police Daphne’s name, and one of the aliases he used to travel. He gave them Daphne’s phone numbers, his addresses, the names of his businesses. Zaoui told them about a bar Daphne owned in Tel Aviv and about his posh villa. Zaoui told them everything.

After France discovered what the VAT scammers, including Daphne, had done with the emissions-trading system, other European countries began uncovering carbon fraud, too. Europol eventually reported that, across the continent, the total amount ripped off by carbon scammers was €5bn. Frunza kept his own score; he thinks the actual figure is closer to €10bn. “In some countries,” Europol reported, “up to 90% of the whole market volume was caused by fraudulent activities.” One national investigator told me that fraud placed the market in existential peril from which it took years to recover. (The market is now estimated to be worth €751bn; at the beginning of 2024, one tonne of carbon was trading at an average of €80.) 

In 2012, Israeli police began pressuring Daphne to testify against a gangster for a matter unrelated to carbon scamming. They picked him up for questioning and to let him know they had their eyes on him. Daphne eventually decided that it was better to serve out a sentence in France than be hounded by Israeli law enforcement. He arrived in Paris on 9 January 2014. When his plane landed at Charles de Gaulle airport, he had only a few essentials with him: a fur vest, a crocodile-skin bag, a Richard Mille watch, a few thousand euros. The police were waiting. When he saw them, he took out his passport. “Yep, it’s me,” he said.

But the authorities wanted him for more than his parole violation. Daphne was also a target of an investigation focused on Crépuscule, and there was a warrant for his arrest. He stood accused of running the brokerage’s carbon scheme and being its main beneficiary. El Ghazouani and a handful of intermediaries and straw managers were also investigated and arrested. Zaoui was indicted, too. If he thought that providing information about El Ghazouani and Daphne would save him from prosecution, he was wrong: French authorities said he was the mastermind of Crépuscule’s operation. That meant he would be tried alongside the men he said had betrayed him.

The Crépuscule case moved slowly. Daphne spent over a year in pretrial detention before he was released with an electronic bracelet, which was removed at the end of 2015. After that he was required to make regular visits to court. While he waited for the trial to begin, Daphne kept an opulent hotel room near the Champs-Élysées.

As for Zaoui, he stayed in Paris until a new investigating judge raised his bail. Zaoui decided that he couldn’t stay. He fled to Los Angeles with Chirelle, where they lived in West Hollywood. He and Chirelle finally got married; he was still wildly in love with her. When he rode his motorcycle down LA’s wide avenues, he felt like anything was possible.

When Chirelle’s US visa expired, she returned to Paris in early 2016. There, French police arrested her on charges related to another fraud investigation. Zaoui was in Israel with their five-year-old daughter at the time. His lawyers in France told him that if he surrendered himself, Chirelle would be released. Her family put pressure on him. So Zaoui got on a plane, went to France and turned himself in.

A few weeks later, Chirelle came to see him in prison. He went to give her a hug, and she pushed him away. She was angry. She had spent more than 40 days locked up, and Zaoui could see that the experience had left an indelible mark on her. “It wasn’t the woman I’d known,” Zaoui told me. “She had been transformed.” (Chirelle and her lawyers declined to comment for this story.)

The Crépuscule trial finally began in May 2017 and lasted several weeks. When the convictions came down, El Ghazouani received seven years in prison, Daphne got nine, and both men were fined €1m. (On appeal, Daphne’s sentence would be increased to 10 years. He was also convicted of involvement in a separate carbon-fraud operation and given six years.) The court couldn’t determine who started Crépuscule; it could only confirm that the company was created in 2002. 

Zaoui was sentenced to six years and fined €300,000. He served three years. Chirelle never came to see him. After getting out, he tried to move on with his life. Under the conditions of his release, he couldn’t open a new business and he would have to pay a portion of his income to the French state until his fine was paid off. He wrote a book and staged a one-man show about his carbon-fraud scheme. He ran for national office and lost.

Zaoui doesn’t sleep much any more. He goes to bed around midnight and wakes up around four. His parents have passed away. He doesn’t see his children often; he’s estranged from Chirelle. There isn’t much to fill his days. He isn’t happy. But at least the specter of imprisonment isn’t lurking over his shoulder. “Freedom,” he told me, “doesn’t have a price.”

Reporting for this story was supported by the McGraw Center for Business Journalism at the Craig Newmark Graduate School of Journalism at the City University of New York.