Ukrainian oligarch Ihor Kolomoisky charged with money laundering, fraud

Ukrainian oligarch Ihor Kolomoisky charged with money laundering, fraud
Ukraine's most notorious oligarch Ihor Kolomoisky has been charged with money laundering and fraud / bne IntelliNews
By bne IntelliNews September 2, 2023

Ukraine’s most notorious oligarch Ihor Kolomoisky has been officially charged with fraud and embezzling from oil companies that he owned by the Ukrainian authorities on September 2.

The Ukrainian Security Service (SBU) released pictures showing law enforcement officials confronting Kolomoisky at his residence and conducting a thorough search of the premises. During this search, Kolomoisky was formally charged with both fraud and money laundering.

"It was established that during 2013-2020 Ihor Kolomoisky legalised more than half a billion hryvnias ($14mn) by withdrawing them abroad and using the infrastructure of banks under (his) control," the SBU said in a statement.

The Security Service's official statement said that Kolomoisky is suspected of laundering over UAH500mn ($13.5mn) during the years 2019-2020.

At an arraignment the same day the judge ordered Kolomoisky to be held in detention for two months or post a bail of UAH509mn ($14mn). Defence lawyers said Kolomoisky would appeal against the ruling, questioning its legality, but that he would not post the bail of $14mn in order to secure his release.

After the hearing at a district court in Kyiv, Kolomoisky was shown being led away by officers wearing a blue tracksuit jacket in television footage.

After the ruling, Zelenskiy appeared to allude obliquely to the case in his evening address, thanking law enforcement agencies for showing resolve in bringing long-running cases to justice.

"Without a doubt, there will be no more decades-long 'business as usual' for those who plundered Ukraine and put themselves above the law and any rules... The law must work," he said, Reuters reports.

During the war, Zelenskiy has been keen to stress Ukraine’s crackdown on corruption as Kyiv has applied to join the EU and hopes to raise billions in investment from the private sector post-war to pay for the country's reconstruction.

At the Ukraine Recovery conference held in London in June Western leaders and Zelenskiy appealed to the international leaders of industry to invest into Ukraine once the fighting stops. The World Bank has estimated the total cost of the destruction caused by the war at $414bn. However, with Ukraine having a reputation of being one of the most corrupt countries in Europe, persuading investors to sink billions of dollars into its economy will be an uphill task.

Two lawmakers – Yaroslav Zheleznyak and Iryna Gerashchenko – suggested on Telegram that the move against Kolomoisky was aimed at generating positive publicity among Ukraine’s foreign backers as well as the public at home who are tired of the war and worried about the problem of entrenched corruption, Al Jazeera reported.

The noose has been tightening around Kolomoisky, who has been the subject of increased scrutiny by the prosecutor’s office for his various dubious money-making schemes.

Kolomoisky was called into the National Anti-Corruption Bureau of Ukraine (NABU) offices in October for questioning, following a search of his house at the Bukovel ski resort. His main residence in Dnipro was searched in February this year.

Kolomoisky was the majority shareholder in the Ukrainian oil refinery Ukrtatnafta, where he has been accused of skimming off large amounts of money and benefiting from state contracts where the company used its connections to overcharge for the oil it sold. The state finally nationalised his stake last November, on the grounds that it was a strategic national asset in wartime.

That the company had also refused to pay UAH3.2bn ($90mn) in taxes in 2021 was also given as grounds for its seizure. Additionally, Kolomoisky's stake in Ukrnafta, an oil and gas extraction company, was taken over by the state.

Kolomoisky is well known for running schemes that allow him to charge a rent or make super profits by questionable meansm, yet he has not been charged or investigated for wrongdoing in his most notorious case. Following a bne IntelliNews cover piece “Privat Investigations” in November 2016 that showed more than half of the bank’s loan book had made loans to shell companies under Kolomoisky’s control, a scandal broke out and an investigation followed. In December the same year the National Bank of Ukraine (NBU) confirmed that there was a $5.5bn hole in the bank’s balance sheet and it was nationalised.

Later an NBU audit found that some 99% of the loan book was fake and the Ministry of Finance was forced to bail the bank using billions of dollars of public money. A subsequent investigation by Kroll traced some of the money overseas, yet Kolomoisky has never been under a criminal investigation for the affair and almost none of the missing $5.5bn has been recovered.

Former Governor of the National Bank of Ukraine (NBU) from 2014 until 2017 Valeria Gontareva also told bne IntelliNews that Kolomoisky personally threatened her life when she refused to return PrivatBank to his control. Her house was later burnt down and the car of her daughter-in-law was hit with a Molotov cocktail and burnt. She finally quit her job as governor when a coffin with a mannequin dressed as her was delivery to the doors of the NBU.

The subsequent senior management of the NBU also came under verbal attack and accused Kolomoisky by name of running a campaign of terror against its staff in 2019.

The now state-owned PrivatBank has brought civil suits against Kolomoisky in London and Cyprus which are currently working their way through the courts and a London judge has frozen $2bn of Kolomoisky assets until the case is resolved.

The pressure on Kolomoisky is slowly building. The Rada passed the so-called anti-Kolomoisky law in May 2020 that made it impossible for the former owner of a bank that has been nationalised to retake control of it, to head off vigorous efforts Kolomoisky was making to regain control of PrivatBank.

The US has opened an investigation into the oligarch on money laundering charges that he sent hundreds of millions of dollars through Cleveland and he has subsequently been sanctioned. In 2021, the US banned Kolomoisky and his family from entering the country, accusing him of corruption and being a threat to the Ukrainian public's faith in democratic institutions.

In July 2022, Zelenskiy stripped Kolomoisky of his Ukrainian citizenship as part of the president’s mounting anti-oligarch campaign. The president kicked the campaign off with an anti-oligarch speech in March 2021 and then the so-called anti-oligarch law in September 2021 that banned state officials from having anything to do with oligarchs.

Observers have watched the relations between Zelenskiy and Kolomoisky closely as the support of the oligarch’s media empire in 2019 is widely credited with enabling Zelenskiy to win the presidential elections then and take office.