Ukraine’s presidential candidate Zelenskiy implicated in PrivatBank scam

Ukraine’s presidential candidate Zelenskiy implicated in PrivatBank scam
Ukraine’s presidential Zelenskiy implicated in PrivatBank scam / wiki
By Ben Aris in Berlin March 4, 2019

Outsider and comic Volodymyr Zelenskiy, the current frontrunner in Ukraine’s presidential election race, has been implicated in a scam to steal money from PrivatBank that belonged to oligarch Ihor Kolomoisky until it collapsed in December 2017.

Volodymyr Ariev, a Verkhovna Rada deputy and member of the president’s eponymous parliamentary party, Bloc of Petro Poroshenko, said that some $41mn from PrivatBank were transferred to the accounts of Kvartal 95 Studio belonging to Zelenskiy, while the bank was still controlled by Kolomoisky.

"Some $41mn of PrivatBank depositors' funds were transferred to the comedian's Kvartal 95 Studio through lending to Kolomoisky-related companies. Everything happened according to the standard for the oligarch scheme that Kroll investigated after the withdrawal by Kolomoisky and Co. of $6bn of depositors' funds and funds that were used for refinancing the bank from the reserves of the National Bank of Ukraine, when the bank began to collapse under the weight of the pyramid created by the owners," Ariev wrote on his Facebook page last week, as cited by Interfax Ukraine.

An investigation into PrivatBank found that nearly the bank’s entire loan book was fake loans to shell companies and associates of Kolomoisky. bne IntelliNews catalysed the collapse of the bank following the publication of a cover story “Privat investigations” in November 2016 that caused a scandal and prompted an investigation by the regulator.

The state nationalised the bank and has injected some $6bn to plug the hole in its balance sheet. However, despite threats of prosecution no case has been brought against Kolomoisky and none of the stolen money has been recovered.

Zelenskiy is leading in the presidential race as the population are tired of their current political elite and want a clean break, but some observers worry about his ties to Kolomoisky.

The revelation was made by a member of Poroshenko’s party so there is likely to be a political element to the announcement as these elections have started to get dirty.

There has been some speculation that if Zelenskiy were to become president he could return PrivatBank to Kolomoisky, despite the billions of dollars of public money used to bail the bank out on its nationalisation by the National Bank of Ukraine (NBU) in 2017.

“That would be a deal breaker for the International Monetary Fund (IMF),” Tim Ash, senior sovereign strategist at BlueBay Asset Management, said in a note, commenting on the rumours.

Ariev detailed a scheme to move money out of PrivatBank and send it offshore in 2012.

According to him, that year PrivatBank issued loans worth over UAH400mn ($50mn) to Realism Oil and Karpatnaftotrade Trade House LLC, which belonged to Kolomoisky’s Privat Group of companies.

These funds were then transferred to the Urkainian gas pipeline company Ukrtransnafta that was also controlled by Kolomoisky at the time. A few days later $38.2mn of this money was sent to the accounts of Transit SA that is a holding registered in Switzerland by Kolomoisky (32.5%), and his partners Hennadiy Bogolyubov (32.5%) and Ihor Surkis (25%).

Transit SA then sent $41mn to the accounts of Godfrey Consulting Limited, registered by Serhiy Melnyk, another representative of nominal holders and the Privat Group, Ariev said.

From there the money was moved again to companies registered by members of the Kvartal 95 Studio that includes Andriy Yakovlev, Borys and Serhiy Shefir, Serhiy Trofimov and Zelenskiy.

The link is that in 2012-2016, all funds were transferred to the following companies or accounts of individuals: Dr. Robert Walz (DE), Pinehill Investment Holdings Inc., Lacrontra Unitrade LLP (the UK), Piper Smith Watton LLP (the UK), Candlewood Investments Limited, Triapos Limited (Cyprus), SHSN Limited (Belize), Atrazon Limited LTD (Cyprus), Maintrade Limited (Seychelles), Panevest End Co SA, (Panama), Aldorante Limited (Cyprus), and Film Heritage Lnc (Belize).

All these companies are registered in offshore havens so the beneficial owner can’t easily be identified – except in two cases: Cyprus Aldorante Limited and Film Heritage Inc. (Belize) which are registered to Zelenskiy, according to the candidate's declaration.