Europe Had a Plan to Reduce Carbon Emissions. Scammers Fleeced It for Billions

Summary

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Lawless Planet – Europe Had a Plan to Reduce Carbon Emissions. Scammers Fleeced It for Billions

Podcast: Lawless Planet
Host: Zach Goldbaum
Date: December 15, 2025

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Episode Overview

This episode of Lawless Planet exposes the story behind one of the biggest environmental frauds in European history: how scammers exploited the European Union’s cap and trade system, designed to reduce carbon emissions, to steal billions through VAT fraud. Host Zach Goldbaum—alongside journalist Jessica Camille Aguirre—uncovers the mechanics of the scam, the personalities involved, and the systemic failures that enabled “the fraud of the century.” The episode explores what happens when mechanisms intended to save the planet become loopholes for financial crime.

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Key Discussion Points & Insights

1. The Origins: Gregory Zaoui’s Journey from Petty Fraud to Carbon Markets

• Gregory Zaoui begins his criminal path stealing VAT on imported goods like Levi’s jeans, exploiting cross-border tax exemptions ([00:51]–[10:45]).
  • Quote:
    • “It’s like in the movie Forrest Gump...” – Gregory Zaoui ([01:32])
• While serving time in prison, his cellmate, obsessed with green energy, plants the seed for Zaoui’s future in clean energy—albeit with old tricks ([00:35]–[03:01]).
• After prison, hoping to “go legit,” Gregory enters the solar panel business, but temptation strikes when he discovers VAT can be skimmed from trading digital carbon allowances.

2. Cap and Trade: Hopes, Loopholes, and Design Flaws

• EU Cap and Trade system introduced in 2005, rooted in the Kyoto Protocol, intended to make polluters pay and incentivize carbon reductions ([03:58]–[08:02]).
  • Explanations by Jessica Camille Aguirre, who investigated the fraud:
    • “What cap and trade does is it puts a price on the ability to emit one unit of carbon.” ([06:56])
    • The system’s digital, intangible nature made it uniquely vulnerable:
      • “One of the scammers told me that it was easier than sending an email.” – Aguirre ([12:24])

3. VAT Fraud Unleashed: Gregory’s Scheme Goes Industrial

• Zaoui exploits VAT exemption for cross-border carbon credit trades:
  • Buys credits VAT-free abroad, sells in France with VAT, pockets the tax ([11:38]–[12:47]).
  • Early scam yields €6,000 profit from a €30,000 transaction.
• Zaoui recruits Kevin El Ghazwani, the family friend who once bailed him out, to scale up schemes using multiple shell companies with hired frontmen ([13:53]–[15:43]).
  • Notable quote:
    • “He knew this was going to be such a huge cash cow... money raining from the skies.” – Aguirre ([13:53])
• The simplicity and opacity of the digital market allowed VAT scams at unprecedented scale:
  • “There was no need for even the pretense of moving something... it was essentially like a serial number that could be traded from me to you.” – Aguirre ([12:24])

4. “The Brain,” Betrayals, and the Carbon Turf Wars

• As profits grow, Zaoui is double-crossed by El Ghazwani, who teams up with another fraudster, Gustav Daphne, behind his back ([16:00]–[22:52]).
  • Daphne is described as a “Casanova-type... bombastic and very suave and entirely offensive, but also somehow charming”—showing the colorful personalities in this criminal underworld ([17:47]).
• The scam becomes a “feeding frenzy,” with millions laundered through various commodities—gold, metals, natural gas ([20:39]–[21:25]).
  • Scammers flaunt their wealth, booking entire luxury stores, buying mansions, and living extravagantly.
  • Quote:
    • “They bought a lot of cars. They invested in real estate all over the world... booked out the entire Hermes store in Paris multiple times to allow his lover to shop there in privacy.” – Aguirre ([21:25])
• Hidden behind shell companies and digital facades, even the scammers themselves struggle to know who they’re dealing with ([24:00]).
  • “...people were betraying each other and helping each other at the same time without ever knowing it.” – Aguirre ([24:00])

5. Detection, Collapse, and Aftermath

• France’s state-owned bank gets suspicious of VAT reimbursements going to far-flung accounts ([24:53]).
• After months of warnings, authorities uncover that 80–90% of carbon trades are fraudulent: “the scale of fraud is unprecedented” ([25:18]–[26:06]).
• Drastic action: the government makes all carbon allowances VAT-exempt—collapsing the market almost overnight:
  • “Recall that at the time, it was likely the case that about 90% of the market was fraud. So the market totally collapsed.” – Goldbaum ([26:53])
• Totals: €1.6 billion stolen in France, over €5 billion (possibly €10 billion) EU-wide ([27:15]–[30:52]).
  • “This was by far the biggest fraud that Europe had ever seen... making millions of euros every day.” – Aguirre ([30:52])

6. Fallout for the Perpetrators

• Gregory Zaoui, Kevin El Ghazwani, and Gustav Daphne are eventually arrested and sentenced—6, 7, and 9 years, respectively ([31:14]).
  • Zaoui turns on his old partners to reduce his sentence:
    • “He basically hands Daphne over to the French police.” – Aguirre ([30:16])
• Most of the stolen money remains unrecovered ([32:45]).
  • “They've recouped a very small proportion of what’s gone missing.” – Aguirre
• Zaoui now restricted from business, writes a book, launches a one-man show, and runs (unsuccessfully) for office; his personal life lies in ruins ([33:02]–[33:42]).
  • “His relationships have crumbled. He is estranged from the mothers of his children. He seems to be pretty lonely.” – Aguirre
• Daphne flees to Israel, now invests in crypto ([33:42]).

7. Systemic Lessons & Stark Realities

• The cap and trade system’s complexity and lack of oversight made it uniquely susceptible to manipulation.
• At root, it enabled pollution-as-usual under a different name:
  • “Trading credits that represent change instead of actually changing.” – Goldbaum ([34:37])
• On paper, the Kyoto Protocol worked; in reality, it didn’t move the needle on global emissions—up 44% since 1990 ([35:39]).
  • “It plays into this desire that we have to concoct mechanisms by which we can delude ourselves...” – Aguirre ([35:06])
• True planetary change can’t be achieved with systems that only look good “on paper.”

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Notable Quotes & Memorable Moments

• Zaoui’s “Forrest Gump” Moment:
  “He was to me what Bubba was to Forrest Gump for shrimp, but in this case, it was for renewables.” – Gregory Zaoui ([01:32])
• On the Cash-Grab Mentality:
  “Their gluttony was so on display and it was so explicit and it was so gleeful.” – Jessica Camille Aguirre ([03:39], repeated at [34:12])
• On the System’s Fatal Flaw:
  “One of the scammers told me that it was easier than sending an email.” – Aguirre ([12:24])
• On the Purpose of Cap and Trade:
  “Trading credits that represent change instead of actually changing.” – Zach Goldbaum ([34:37])
• On Complexity and Alienation:
  “These steps that try to alienate us... make us feel stupid for not understanding these complex systems... a way to undermine a common language...” – Aguirre ([36:58])

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Important Timestamps

• 00:35 – Zaoui’s cellmate champions green energy (Forrest Gump analogy)
• 03:58 – Introduction of the cap and trade system and its flaws
• 07:54 – The logic and incentives behind cap and trade
• 11:38 – Zaoui’s discovery of VAT in carbon trading
• 12:24 – Digital nature of carbon allowances makes fraud easy
• 15:43 – Building shell companies and frontmen for the scam
• 17:47 – Introduction of Gustav Daphne, the flamboyant co-fraudster
• 21:25 – Display of scam profits: luxury, excess, and impunity
• 24:53 – Bank and authorities begin to detect the fraud
• 26:32 – Authorities make trading VAT-exempt, collapsing the carbon market
• 27:15 – Totals: billions in VAT stolen, market impact
• 31:14 – Sentences for the conspirators
• 32:45 – Most stolen money remains unrecovered
• 34:12 – Broader implications: the system’s failure
• 35:39 – Comparison: paper success vs real-world emissions

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Summary

This episode pulls back the curtain on how a plan meant to curtail European carbon emissions became “the fraud of the century.” Through vivid storytelling, interviews, and context, it shows how the carbon market’s design was both a literal and metaphorical playground for seasoned scammers. The story of Zaoui, El Ghazwani, and Daphne is as much a cautionary tale about environmental capitalism and regulatory naivete as it is a crime thriller. The conclusion questions whether market-driven solutions—so easily gamed—are enough to face the planetary climate crisis.

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Transcript

[Zach Goldbaum]

Wondry subscribers can listen to new episodes of Lawless Planet early and ad free right now. Join Wondry in the Wondry app or on Apple podcasts. The holidays can be hard for a lot of people, but for Gregory Zaoui, the days leading up to Hanukkah in 2004 are especially brutal because he's stuck behind bars in a French prison and his cellmate won't shut up.

[Gregory Zaoui]

He would talk to me, I swear. Morning till noon, you're locked up 20 out of 24 hours in a 9 square meter cell. And from morning to night, he talks to me about ecology, like solar panels, geothermal energy, heat pumps.

[Zach Goldbaum]

Gregory doesn't really want to talk about saving the environment right now. He he's currently in prison for VAT fraud, as in stealing taxes from the government, which he's been doing since he started importing Levi's jeans as a teenager. He's been hoping to be released early in time to spend the first night of Hanukkah with his family. The judge agreed, but only if Gregory comes up with €75,000 for bail. Gregory's money isn't in France right now, and it'll take time to transfer it into the country. He thinks he's out of luck, and all he can do in the meantime is listen to his cellmate drone on and on about renewable energy.

[Jessica Camille Aguirre]

They will film Forrest Gump.

[Gregory Zaoui]

It's like in the movie Forrest Gump when Forrest joins the army. He meets his buddy Bubba, who talks to him about shrimp. From morning till night, he was to me what Bubba was to Forrest Gump for shrimp, but in this case, it was for renewables.

[Zach Goldbaum]

Before he landed in jail, Gregory's chatty cellmate installed solar panels in the south of France, and he wants Gregory to know this is the future. Forget stealing VAT tax from imported blue jeans and cell phones. If you want to make money, get into business. Protecting the environment. Freedom comes sooner than Gregory expects. His mother pays him a visit, and in her hands is a €75,000 check, courtesy of a family friend, a man named Kevin El Ghazwani. This kindness isn't lost on Gregory, and he makes a mental note to return the favor as soon as he can. That night, Gregory celebrates Hanukkah with his three children, surrounded by gifts he and his wife picked up on the drive home from prison. But to Gregory, the biggest gift of all is that he's free. And now that he's out, he needs to find a new line of work, preferably one that won't land him back in prison. And that's when his mind returns to his talkative cellmate and his rambling monologues about solar panels.

[Gregory Zaoui]

And when Forrest leaves the army, what does he do? He starts farming shrimp under Buba's advice.

[Zach Goldbaum]

So Gregory decides he's going to go into the clean energy business. But old habits die hard, and soon Gregory will find himself embroiled in a new kind of fraud on a scale he never could have imagined. From wondry, I'm zach goldbaum, and this is lawless planet. Each week, we tell a new story about the true crimes fueling the climate crisis and the people fighting to save the planet or destroy it.

[Jessica Camille Aguirre]

Their gluttony was so on display, and it was so explicit and it was so gleeful.

[Zach Goldbaum]

In 2005, right around the time Gregory Zaoui was getting into solar panels, the European Union was thinking about clean energy, too. That year, the EU debuted something called the Cap and Trade system. It was designed to use the tenets of the free market to convince businesses to cut down on their carbon emissions, saving the planet through capitalism. What's not to love? But this new system turned out to be flawed from the start. Rather than discouraging polluting, it enabled companies to simply pay to pollute. And the loopholes were so wide that criminals practically waltzed through, orchestrating what some would later call the fraud of the century. And while two rival scammers in France competed to steal the most money, their deals propped up the cap and trade market so much that in the end, no one could really tell if it was doing anything to fight climate change at all. In 1997, with the stroke of a pen, we solved the climate crisis. Or at least we tried to. That December, representatives From more than 150 countries gathered in Kyoto, Japan, to debate an agreement that was supposed to curb greenhouse gas emissions across the planet. They called it the Kyoto Protocol.

[News Anchor]

The Global Warming treaty was finally approved today at the Kyoto Summit. It would require industrial nations to reduce greenhous gas emissions by an average of 5.2% below 1990 levels by the year 2012.

[Zach Goldbaum]

The Kyoto Protocol set legally binding emissions targets for each of the developed countries involved. And that was a big deal. It was the first international agreement to address global warming. But the participating nations had a daunting task ahead of them. How does a country simply stop its most powerful industries from polluting? The answer was slowly. To ease the transition, the US Decided that the protocol should include a few ways for countries to offset their emissions and meet their targets, even if they weren't really Meeting them, an international emissions trading regime will be established, letting industrialized countries buy and sell excess emissions credits amongst themselves. This trading system might sound a little convoluted, but essentially, when one company exhausts the carbon it's allowed to emit, it can buy credits from another company that's emitting less than their allowance. The original polluted air doesn't go away. But because another entity polluted less air than it was allowed to, or planted some trees, it evened out to meet the country's goal. In Europe, this system came to be known as cap and trade. Other countries would soon follow with similar programs, but the EU was leading the charge.

[Jessica Camille Aguirre]

What cap and trade does is it puts a price on the ability to emit one unit of carbon.

[Zach Goldbaum]

Jessica Camille Aguirre is a reporter and journalist based in Germany. And she got deep in the weeds of the EU's Cap and Trade system while pursuing a story about Gregory Zawi for the Atavist magazine.

[Jessica Camille Aguirre]

So effectively, if you have a certain number of these allowances, they allow you to emit a certain amount of carbon dioxide into the atmosphere. And these allowances are tradable.

[Zach Goldbaum]

The cap is a figurative cap on emissions. Country by country, a smaller and smaller fraction of carbon allowances would be issued each year. And that scarcity would mean higher prices for these allowances every year. It would become more expensive to pollute and more lucrative not to pollute because you could resell your unused carbon credits.

[Jessica Camille Aguirre]

The idea is to use incentives that are built into the capitalistic market to do something about climate change.

[Zach Goldbaum]

After the Kyoto Protocol was signed in 1997, it took eight long years to be ratified and to 2005. By then, the US had backed out. But the EU was on board and eager to finally tackle global warming. And in a way, so was Gregory Zaoui. After his release from prison In December of 2004, Gregory starts a new legit company installing solar panels on homes and businesses. He is brainy and serious, so he fits in well in his new industry.

[Jessica Camille Aguirre]

He's kind of a shy man, very smart, very analytical and cerebral, and was very conservative in the way that he presented himself. He kind of gives the impression of being in a state of constant distraction.

[Zach Goldbaum]

Gregory grew up in an Algerian Tunisian family in a rundown suburb of Paris. From an early age, he wanted to rise above his working class roots. As a teen, he worked almost constantly when he wasn't in school, bootlegging VHS tapes, running the coat check at a Parisian club, making deliveries on his scooter. And when a friend from Synagogue mentioned that his parents were wholesale importers for Levi's. Gregory saw an opportunity. He bought up pair after pair, selling them for a considerable markup. And in the process, he discovered an interesting way to turn an even bigger profit.

[Jessica Camille Aguirre]

Vat. It's value added tax. And this is the primary taxation mechanism that's used in the European Union. And essentially it's basically like a sales.

[Zach Goldbaum]

Tax, but it's not exactly just a straight sales tax. VAT is collected incrementally as a product is sold down the supply chain from manufacturer to retailer to consumer. In the EU, it's determined by each country. In 2005, France's general VAT was a little under 20%. But not every transaction is subject to VAT.

[Jessica Camille Aguirre]

The European Union wants to make sure that cross border trade still takes place. And so they make cross border trades VAT exempt.

[Zach Goldbaum]

Gregory decided to use that VAT exemption to his advantage. He'd buy jeans without vat, then add the tax to each pair of Levi's he sold. And instead of handing it over to the government, he'd just keep it.

[Jessica Camille Aguirre]

So basically, what the government is expecting you to do is become a tax collector and you're expected to give that tax over to the government. But if I disappear before I ever make that payment, then the government never sees that money.

[Zach Goldbaum]

This kind of VAT fraud was rampant in Europe, and Gregory took full advantage until he got caught and spent a month in prison in 1996 for the Levi's scam. As soon as he got out, he started a new VAT scheme with mobile phones. It made him rich, but also sent him right back to prison. And that's where he met the bubba of renewable energy. So once he got out again, he wanted to run his solar panel company as a legitimate business, at least at first. Gregory starts attending trade shows to learn more about his new green industry. And at one of these events, he finds out about the EU's new emissions trading system. He understands the cap and trade part, but he wants to know how the actual carbon sales work. So at one trade show, he corners some representatives for PowerNext, the first carbon trading platform in Paris.

[Gregory Zaoui]

And I ask the magic question, perhaps naively, do you have a VAT on these carbon quotas? And the person in charge just as naively responds, Absolutely, Mr. Zaoui. And then I ask, could I have a registration form? And that's where the adventure begins.

[Zach Goldbaum]

For Gregory. This new information about carbon trading is just too tempting to ignore. VAT fraud can be tricky to pull off when you're dealing with physical products like blue jeans and mobile phones, which require time and work to transport, or at least pretend to transport. But these new carbon allowances were totally different because there was nothing to physically move. Here's Jessica.

[Jessica Camille Aguirre]

What was significant about the cap and trade system is that those allowances were entirely digital. There was no need for even the pretense of moving something from one place to another. It was essentially like a serial number that could be traded from me to you. One of the scammers told me that it was easier than sending an email.

[Zach Goldbaum]

After confirming with PowerNext that anyone can buy carbon allowances for their business, Gregory decides to do a little experiment. He buys €30,000 worth of carbon allowances from the Netherlands, which are VAT exempt, and then he resells them in France with VAT tacked on, and he keeps the VAT pulling in nearly €6,000 in profit. Gregory can't believe that regulators didn't see this obvious loophole. But that's not his problem to solve. Instead, he's focusing on how to take this as far as he can. But he needs more capital. And that's when he remembers the family friend who bailed him out of prison recently. Kevin El Ghazwani. Clearly, Kevin has money and Gregory owes him a favor. What better way to repay him than by inviting him in to the perfect crime? In 2007, Kevin Elgoswany meets Gregory at his office near the Champs Elysee. El Gozwani is originally from Morocco, slightly younger than Gregory and newly married to a former Miss Europe. Gregory's excited to bring him into the fold.

[Jessica Camille Aguirre]

The way that he tells it is that he knew that this was going to be such a huge cash cow that it would just be madness, you know, money raining from the skies, that he would be doing a favor to anybody who went into business with him.

[Zach Goldbaum]

Gregory proposes using one of his existing companies as a front. And he warns Algozwani that although the scheme definitely will be lucrative, it will also take some time because they're new. Carbon allowance prices are pretty flat, but each year fewer allowances will be issued and the demand will inflate prices.

[Jessica Camille Aguirre]

So the market existed, but it wasn't until its second phase, when fewer allowances would be available, that there would be kind of interest from traders and thus the COVID for the fraud to take place.

[Zach Goldbaum]

After a few days, El Ghazwani gets back to Gregory. He's in. He just wants to make one small change. Instead of using Gregory's company as the front, he's created four of his own, and he wants to use those instead. He's also got people waiting in the wings to help manage the scheme. Gregory agrees to the terms, and they also agree to split the profits equally. While they wait for the expected boom in carbon allowances, Gregory and Al Ghazwani start building their trade portfolio. They register one of their companies, Crebuscule, as a brokerage on the PowerNext platform. And they make sure to register both in France and in other countries where they can buy carbon allowances VAT free. To hide the fact that there are only two men behind all of these companies, El Ghazwani brings in a slew of blue collar workers, guys working as trash men and delivery drivers who are happy to lend their names to the paperwork for a small fee. Gregory and El Ghazwani build a rapport and seem to enjoy working together.

[Jessica Camille Aguirre]

And they start meeting up and, you know, to make these businesses look legitimate, they're answering emails, they're signing on. They're doing this oftentimes in Paris from, you know, a McDonald's or someplace with a public IP address in order to make it untraceable.

[Zach Goldbaum]

But then one morning, just a few months into their partnership, Gregory gets an alarming surprise. When he tries to log into one of their company accounts from a cafe. He discovers that he's locked out. He calls up El Goswani in a panic. El Ghazwani asks to meet in person. He says he's in debt, over invested by €300,000, and was forced to cut a deal with someone who's now taking over their shared companies. Gregory is devastated and puzzled. Why couldn't his friend just wait a few months for all of their investments to pay off? But El Ghazwani says the deal is done. He pays Gregory €80,000, a portion of the profits from selling their companies. And just like that, their partnership is over. It's a blow to Gregory's plan, but he isn't giving up yet. Instead, he forms a new company that feels a little safer. Instead of stealing the VAT off his own trades, he'll just broker deals for other scammy traders. But Gregory still needs an investor to replace Al Ghazwani, and he's about to connect with a criminal mastermind who will turn his whole scheme upside down. In Gregory Zawi's search for a new partner, he remembers a guy he'd met back in his days of mobile phone VAT fraud. Though they never worked together, they seemed to pursue the same schemes time and time again. Jessica Camila Guerre spoke to him for her reporting and he insisted on using a pseudonym. Gustav Daphne.

[Jessica Camille Aguirre]

He's kind of like a Casanova type. His shirt is always unbuttoned to his mid chest and he has this big diamond encrusted necklace he wears and he's a chain smoker and he dresses in like snakeskin boots. And he always has like three phones in his possession and one of them is usually ringing. He's lascivious and bombastic and very suave and entirely offensive, but also somehow charming at the same time.

[Zach Goldbaum]

Daphne and Gregory had run in the same circles for years, but they weren't really close. Gregory admired him, though. Daphne had found a lot of success and set up a lot of businesses. When Gregory tracks him down, Daphne is living in Tel Aviv running a nightclub along with a store that sells fur to wealthy Russian oligarchs.

[Jessica Camille Aguirre]

Zawi calls him and says, you know, could you give me money? This is a surefire win. We're going to make so much money. I just need a little bit of cash right now and you'll never regret it. And Daphne's like, no, I'm retired. I'm here in Tel Aviv. I'm happy. I've gotten out of everything. I'm not doing crime anymore.

[Zach Goldbaum]

Gregory's disappointed, but he eventually secures a loan from someone else. And Gregory and his new shady venture are all teed up just in time for the carbon market to absolutely explode. In 2008, the world's economy takes a major nosedive. Thanks to the housing crisis in the us Financial markets everywhere are suffering, except one. Just as Gregory predicted, once the EU reduces the supply of carbon allowances, demand goes up and so do prices. And in just two years, the value of the European carbon market more than doubles, and daily trading volume rises from 2 million in late 2008 to nearly 20 million by the following June. But many of those trades aren't what they seem, because Gregory isn't the only one who's noticed how easy it is to skim the VAT off the top of each transaction.

[Jessica Camille Aguirre]

As Zawi predicted, people are making huge amounts of cash and the government has decided, basically as a way to facilitate the market, to make sure that it's getting off the ground. They've eschewed a policy that they had of kind of waiting a certain period of time before issuing reimbursements. They're doing it right away. So they're just doling out cash, basically. And the way that they're doing it is they're just depositing money into whatever bank account. The companies are saying they want the reimbursements to go to, and these accounts are all over the world.

[Zach Goldbaum]

It's a feeding frenzy, and Gregory is right in the heart of it. He's become so well known that his fellow VAT fraudsters give him a nickname, the Brain. Gregory prides himself on presenting a clean front. To avoid suspicion, he hires legitimate traders and makes sure that a portion of his business is actually real. They're not just skimming VAT off the top of carbon trades. They're also trading in gold, metals, and natural gas. And those perfectly legal trades are netting him nearly a hundred thousand euros a day, in addition to the millions he's making through brokering VAT fraud for other companies. And Gregory and his cohort aren't hiding these insane profits.

[Jessica Camille Aguirre]

They bought a lot of cars. They invested in real estate all over the world. They bought quite a few mansions and businesses. In Los Angeles, Zaoui booked out the entire Hermes store in Paris multiple times to allow his lover to shop there in privacy.

[Zach Goldbaum]

That's right. Somehow, in the midst of all of this, Gregory finds the time to start having an affair. How very French of him. It might seem hard to believe that Gregory's own employees don't even realize there's any fraud happening behind the scenes. But as Gregory later tells Jessica, quote, the best way to go unnoticed is to be noticed. But other scammers are noticing, and it's enough to set off a carbon credit turf war. Remember Gregory's former partner, Kevin El Khazwani? The one who told Gregory he was getting out of the VAT fraud racket to settle his debts? Well, it turns out that wasn't exactly true. In fact, not only is El Ghazwani still very much in the game, he's been working all along with a different partner, Gustav Daphne, the guy who Gregory had asked to be his investor at.

[Jessica Camille Aguirre]

The time that Zawi had called Daphne, asking him for an investment, and Daphne had said, oh, no, I'm not in the market anymore. Daphne at that point was in the market with Zaoue's companies.

[Zach Goldbaum]

Later on, Daphne even claims he founded Crepa School, one of the companies Al Ghazwani worked on with Gregory. So Al Ghazwani had been working with Daphne behind Gregory's back the entire time. When he told Gregory he was in debt and had to sell the companies they shared, that was a lie. And when he sent him away with an €80,000 payoff, he was just getting rid of him. That summer, Gregory hears from a mutual friend that Algozwani has been making fun of him behind his back, calling him naive and laughing at how trusting he was. And this really rubs Gregory the wrong way.

[Jessica Camille Aguirre]

So at a certain point, Zawi has this massive confrontation with El Ghazwani and says, you know, how could you betray me like this? And they have a huge falling out.

[Zach Goldbaum]

Gregory refuses to work with the two men who betrayed him. But that's not as easy as it sounds. Thanks to the convoluted nature of this scheme, the criminals themselves are often in the dark about who they're working with. Between shell companies and pseudonyms, it's impossible to know where one scam ends and another begins.

[Jessica Camille Aguirre]

When you're on the market, it's not always clear who you're trading with. One of my sources in the French justice system said that in some cases, people were betraying each other and helping each other at the same time without ever knowing it.

[Zach Goldbaum]

All the while, as the scammers fight amongst themselves and resentment builds, a threat to all their operations is looming. France's state owned bank is catching on that something strange is happening in the carbon market. While Gregory was fighting for dominance in the VAT fraud world, officials at France's state owned bank started to notice something odd in their accounting. As the government's bank, they send out VAT reimbursements regularly. But in late 2008, they realize they're sending millions in reimbursements to bank accounts that don't quite make sense.

[Jessica Camille Aguirre]

These bank accounts were in random places. The French government was paying out enormous sums to random bank accounts in Hong Kong and Cyprus, places that Zawi likes to point out weren't even parties to the Kyoto agreement.

[Zach Goldbaum]

Something is clearly off. And over the course of eight months, the state bank sends over a dozen statements of concern to France's fraud agency.

[Jessica Camille Aguirre]

Something's wrong with the market. People kept raising these warning signs, but it took months before the institutions reacted in the way that they should have. It was a very, very slow burn.

[Zach Goldbaum]

Finally, the fraud agency and the customs police dig into records from banks and trading platforms and quickly realize that the scale of fraud is unprecedented. The transactions are intentionally confusing, but it's clear that that a huge number of exchanges on the carbon market are fraudulent, between 80 and 90%. French authorities aren't sure how to respond at first. In June 2009, they just shut down the entire carbon market for two days for, quote, technical reasons.

[Jessica Camille Aguirre]

The French ministers at the time tried to say, like, we're just kind of adjusting things. There's been no fraud. It's fine, everything's fine, everything's under control. We're just taking a closer our luck.

[Zach Goldbaum]

But everything is definitely not under control. And when the market reopens, the authorities have taken a drastic measure to stop scammers from skimming the VAT off the top of their fraudulent trades. They've just made all carbon allowances fully VAT exempt.

[Jessica Camille Aguirre]

They said VAT no longer applies to this market. The trading can continue, but we're not going to tax anymore.

[Zach Goldbaum]

Grace has averted, right? Not quite. Because soon it becomes clear that removing that 20% VAT tax has an unintended consequence.

[Jessica Camille Aguirre]

So if you're conducting a legitimate business, this doesn't matter at all to you. But if the only reason you're in the market is to try to scrape off this 20%, then you have no reason to be there anymore. Recall that at the time, it was likely the case that about 90% of the market was fraud. So the market totally collapsed.

[Zach Goldbaum]

As France's accountants start to tally the carbon trades that fed this fraud, their eyes bulge. The total VAT stolen by scammers adds up to 1.6 billion euros. And a sizable portion of those trades come from Crepuscuil, the company led by Gustav Daphne and Kevin El Ghazwani. In the early morning of December 8, 2009, Gregory Zawi wakes up to the sound of his dogs, whose names are Anakin and Bugatti, barking at the front door. After France discovered a staggering amount of carbon fraud a few months earlier, the rest of the EU started looking more closely at their markets. And they quickly realized that France was just the tip of the iceberg. In Denmark, the UK and the Netherlands, authorities found that a huge volume of their trades had been made by scammers skimming the VAT off the top. Before he lets them in, he grabs a pile of incriminating papers and SIM cards and flushes them down the toilet. After two minutes, Gregory opens the door in his underwear and the French police take him to their car. They drive him to his offices, where they go through his computers before taking him into custody. In La Sante prison, Gregory has a chance to look through his case files. And that's when he discovers that his phone had been tapped and he's being held because they suspect he's behind Crepuscule, the company Kevin El Ghazwani and Gustav Daphne stole from him.

[Jessica Camille Aguirre]

And now Zaoui feels doubly betrayed because not only did the companies that he started get taken to someone else, but now he's getting pinned for whatever those companies did that he claims not to have had anything to do with.

[Zach Goldbaum]

Gregory knows El Ghazwani has also been taken in for questioning, and he's furious. Did his old partner sell him out and pin all of these crimes on him? As he waits in prison, stuck in a tiny cell, he decides he needs answers. So he tracks down Daphne's phone number.

[Jessica Camille Aguirre]

He calls Daphne and says, listen, tell me what I need to say to get out of here. Like, I don't want to be in prison. You know that you are the one that has these companies. You're the one who did all this. Like, what is it that I need to do? And Daphne here is a threat. He thinks that Zawi is going to turn him over.

[Zach Goldbaum]

According to Jessica's reporting, Daphne responds in kind, saying, listen, you son of a bitch, if you want to push, I can find a lot of things against you beyond this case, so cool down. To Gregory, this means war. So he tells authorities who they should really be looking for. Gustav Daphne.

[Jessica Camille Aguirre]

He basically hands Daphne over to the French police. He gives him all of his information, and then ultimately, Daphne also gets nabbed by the police when he comes back to France.

[Zach Goldbaum]

While Gregory and Daphne languish in prison, international leaders convene in copenhagen for the 15th UN Climate Change Conference. And while they're busy negotiating new agreements to tackle the climate crisis, Europe's law enforcement agency, Europol, releases some shocking new numbers about the scale of the cap and trade fraud. They report that the EU has been robbed of over 5 billion euros.

[Jessica Camille Aguirre]

I spoke with another kind of expert who says that it's probably closer to 10 billion. So this was by far the biggest fraud that Europe had ever seen, and it meant that they were making millions of euros every day.

[Zach Goldbaum]

In 2017, nearly a decade after the heyday of carbon VAT fraud, Gregory Zaoui and his fellow fraudsters were finally sentenced for their crimes. In return for ratting out Daphne and Algozwani, Gregory got out of prison on bail. He hung around Paris for a while, and then a new judge was assigned to his case and raised his bail price. So Gregory decided to leave Paris and go on the run. After a stint in Beverly Hills, where he lived in a mansion and rode around in a stretch Hummer. He returned to Paris in 2016 and was sent back to prison. In May 2017, the trial began for what the press called the fraud of the century. And while authorities were able to nail down one of the scam companies involved, it was impossible for for them to untangle any others, including Crepuscule, an employee of the French justice system, later described the case as a jigsaw puzzle. As the trial comes to a close, Gregory learns his fate. Six years in prison and a €300,000 fine. El Ghazwani gets seven years and Daphne gets the heaviest sentence at nine. In the aftermath of the trial, he comes to be known as the Prince of Carbon. In October 2017, a month after Gregory and his fellow scammers were sentenced, the EU introduced reforms to try and close the holes in the VAT system. But one problem remains. There's still a lot of money missing.

[Jessica Camille Aguirre]

The person I met with in Paris who works for the French justice system, told me that they're still trying to track down a lot of the money and they've been pretty unsuccessful. So they've recouped a very small proportion of what's gone missing.

[Zach Goldbaum]

After the trial, Gregory served about two years in prison. As a result of his conviction, he's no longer allowed to open new businesses. So instead he wrote a book and then committed arguably his worst crime yet, turning his life into a one man show. He also later ran for national office, but lost. And that's not the only thing he's lost in pursuit of money.

[Jessica Camille Aguirre]

His relationships have crumbled. He is estranged from the mothers of his children. He seems to be pretty lonely. And, yeah, I think that he's kind of trying to piece his life back together.

[Zach Goldbaum]

As for Gustav Daphne, he fled the country before his sentence was handed down in 2017. He called in a series of favors and a series of private jets and yachts. And after a few stopovers in Greece and Turkey, the Prince of Carbon made it to Israel, where he currently lives in a gated villa and is focused on his new venture, crypto investing. Gregory, Daphne and El Ghazwani may have broken the law, but they did it off the back of a clearly broken system.

[Jessica Camille Aguirre]

Their gluttony was so on display and it was so explicit and it was so gleeful and it was so observable that it's almost like they gave a face to something that we know is happening on a much, much bigger level, but that's happening kind of behind closed doors in a way that we can't often.

[Zach Goldbaum]

Behind all the VAT fraud and the colorful scammers and international deals and betrayals. The original purpose behind the Kyoto protocol was simple. 160 countries across the planet recognized that something needed to be done to fight climate change. But reining in the companies that pollute the most was deemed out of the question. Instead, Europe used the free market to try to curtail the free market trading credits that represent change instead of actually changing.

[Jessica Camille Aguirre]

In these programs, the incentive that everyone has is to, on paper, protect the environment, and nobody has an incentive to question the validity of the system. It plays into this desire that we have to concoct mechanisms by which we can delude ourselves that something is being done without making any kinds of changes in the way that we live.

[Zach Goldbaum]

The Kyoto Protocol was designed to reduce carbon emissions by 5.2% from 1990 levels. And they set a deadline, 2012. So how did they actually do? On paper, the protocol was a success. Across the countries involved, pollution was reduced between 7 and 12.5%. But a lot of countries didn't participate, including major polluters like China, India and the us. And when you look at the numbers off paper, global emissions weren't reduced at all. Instead, they rose by 44% as of 2025. The EU has set some new lofty goals when it comes to greenhouse gases. Using 1990 levels as a benchmark, they aim to cut emissions by 55% by the year 2030. They're amending a few things about cap and trade, but these things seem more focused on making the market work than on limiting pollution. On its face, cap and trade isn't a terrible idea. If big business is motivated solely by money. A financial incentive to use less carbon should in theory work, but in practice, it just lets big polluters buy their way out of accountability using a system that seems deliberately designed to obscure what's really going on.

[Jessica Camille Aguirre]

We know how the planet works, you know, we know what an environment is. We know what's fucked up. We know when somebody's exploiting the system. We know these are not complicated things, but we get presented with solutions and they're so complex. And I think that, like, these steps that try to alienate us from the way that we know how the world works and, like, ask us to try to, like, intellectually keep up and make us feel stupid for not understanding these complex systems. It's just a kind of a way to, like, undermine a common language, even to talk about the things that we're, that we're trying to solve together.

[Zach Goldbaum]

Next on Lawless Planet, we're taking a few weeks off for the holidays, but please stick around because we're going to be dropping some really amazing episodes from shows we love in the feed. And when we come back, the story of a roving trash barge that exposed an American waste crisis. The US was running out of landfills.

[Gregory Zaoui]

So they put it on a barge.

[Zach Goldbaum]

And started looking for a place to go. For today's episode we relied heavily on the Atavist article Watch It Burn by Jessica Camille Aguirre and Alec Henry's podcast Le Tclique all this Planet is pretty produced and hosted by me, Zach Goldbaum. This episode was written by Olivia Briley. Our Senior producer and Senior Story Editor is Derek John. Senior producer for Wondry is Andy Herman. Our senior Managing Producer is Lata Pandya. Our Managing Producer is Jake Kleinberg. Our Associate Producer is Lexi Pirie. Music and sound design by Kenny Kusiak Dialogue edict by George Drabing Hicks. Our music supervisor is Scott Velasquez for Frison Sync Voice acting by Ibrahim El Hel Fact checking by Brian Poonyant. Our legal counsel is Deb Drouze. Executive producers are Marshall Louie and Jenny Lauer Beckman for One Tree. Thanks for listening. We'll see you next week. Follow Lawless Planet on the Wondry app or wherever you get your podcasts. You can listen to new episodes of Lawless Planet early and ad free right now by joining Wondry plus in the Wondry App, Apple Podcasts or Spotify. Before you go, tell us about yourself by completing a short [e-mail] survey.