State-owned PrivatBank will start international enforcement proceedings to seize the assets of jailed oligarch and Ukrainian President Volodymyr Zelenskiy former business partner Ihor Kolomoisky, after he missed a court-imposed deadline to pay $3bn in damages.

Kolomoisky and his business partner Hennadiy Boholiubov were the former owners of Ukraine’s biggest commercial bank PrivatBank, that was nationalised in 2016 after a bne IntelliNews cover story “Privat Investigations” exposed a massive fake loan scheme that drained the bank of some $5bn – the biggest banking fraud in Ukraine’s history.

Now under government ownership, new management has been trying to recover what they have dubbed the “fraud loans” with legal cases in London and Cyprus, among other places, which were the jurisdictions used to launder most of the illegal loans.

A forensic investigation of the bank’s books by the National Bank of Ukraine (NBU) after the bank was nationalised found over 90% of the loans on the bank’s loan book were fake.

Return to Kyiv

Kolomoisky left the country for Israel after Petro Poroshenko became president but returned following Ukrainian President Volodymyr Zelenskiy election in 2019. Kolomoisky is a former business partner of Zelenskiy, introduced to him by Timur Mindich, who is now at the centre of the Energoatom corruption scandal, and bankrolled Zelenskiy's election campaign.

Relations between the president and the oligarch soured after Kolomoisky mounted a concerted campaign to regain control of PrivatBank or be paid $2bn in compensation for the bank’s nationalisation. He brought over 500 legal cases and threatened NBU staff in a “campaign of terror”, according to officials at the regulator.

Former NBU governor Valeria Gontareva, who was the head of the central bank at the time, told bne IntelliNews in an interview, Kolomoisky personally threatened her life. She quit her job and left the country after her dacha was burnt down by an unknown arsonist and a coffin containing a mannequin in her image was delivered to the doors of the NBU building.

The issue came to a head when Zelenskiy was forced to push the so-called anti-Kolomoisky law through parliament in May 2020 that made it impossible for the former owner of a bank that has been nationalised to retake control of it.

Zelenskiy followed up with his anti-oligarch speech in March 2021 and then an anti-oligarch law in September the same year. Eventually, Zelenskiy ordered the Ukrainian Security Service (SBU) to arrest Kolomoisky in September 2023 who was later charged with multiple counts of fraud. Zelenskiy also stripped him of his Ukrainian citizenship and the US imposed sanctions on Kolomoisky in March 2021 in connection with money laundering charges in the US.

Kolomoisky was even charged with murder for ordering a man's death over 20 years ago. Kolomoisky faces life in prison if convicted, but currently remains in pre-trial detention.

 

Court cases

 

The UK court case started in 2017 when the UK High Court judge immediately froze some $2bn of Kolomoisky and his partner’s assets. According to PrivatBank, the deadline for voluntary payment expired on November 24 without any funds received.

Kolomoisky failed to meet a UK court-ordered payment deadline of over $3bn, Interfax-Ukraine reported on November 24. The High Court ruled on November 10 that the businessmen must pay approximately $1.8bn in damages, $1.2bn in interest, and a further £76mn ($100mn) to cover the bank’s legal costs.

A July judgment concluded that Kolomoisky and Bogolyubov had orchestrated “a highly complex loan recycling scheme” that siphoned funds from PrivatBank prior to its 2016 nationalisation.

Sham loans and falsified trade documents were used to funnel money to companies secretly owned by them in the United Kingdom and the British Virgin Islands between 2013 and 2014.

Kolomoisky and Bogolyubov, who have long denied wrongdoing, said the case was politically motivated.

"The defendants failed to make any payments to recover damages to PrivatBank awarded by the judgment," the bank stated.

Kolomoisky and Boholiubov had previously sought a general stay of execution on the judgment, but their applications were dismissed, leaving the court's decision subject to immediate enforcement, according to the bank, Interfax reports.

PrivatBank said it is preparing to enforce the judgment not only in the UK but also in multiple other jurisdictions, including Ukraine, where the defendants are believed to hold assets. The bank emphasised that such enforcement will be legally complex and time-consuming but remains committed to full recovery.

"Enforcement will be a lengthy and complex process. Nevertheless, PrivatBank will continue to take all necessary steps to secure full execution of the Court’s judgment, including through cross-border recovery tools," the bank said, reports Interfax.

The bank also noted it has the "experience and resources required to pursue all available legal enforcement mechanisms, irrespective of the complexity of the ownership structures involved."

As bne IntelliNews reported, the High Court’s decision is regarded as a landmark ruling in the long-running legal dispute between PrivatBank and its former shareholders.

PrivatBank is still Ukraine’s largest commercial bank by assets. But just under half of the loans in its loan book remain non-performing loans (NPLs) as the new management work to recover or write off the bad debt.