Ukrainian oligarch linked to Zelenskiy suffers blow in London court

A picture made available on 25 March 2015 shows Igor Kolomoisky, the governor of Dnipropetrovsk region, at the Presidential Office in Kyiv, Ukraine, 30 April 2014. [Mikhailo Markiv/EPA/EFE]

Ukraine’s new President Volodymyr Zelenskiy hardly expected to become a protagonist in a possible impeachment of his US counterpart Donald Trump. On top of that, his name has now also appeared in the press in relation to a London court case of possible financial malpractice involving billions of dollars.

Zelenskiy, a former comedian, is known to have longstanding business ties to Igor Kolomoisky, one of Ukraine’s most powerful oligarchs. The latter lost on Tuesday (15 October) an attempt to release $1.9 billion of assets frozen by an English court in connection with a banking scandal that still threatens to derail Ukraine’s economic recovery.

The Court of Appeal in London upheld an asset freeze imposed in 2017 against Kolomoisky and Gennadiy Bogolyubov, the former owners of PrivatBank, Ukraine’s largest lender.

The case is part of a protracted legal battle between the Ukrainian government and Kolomoisky and Bogolyubov after PrivatBank was forcibly nationalised in 2016 as part of a clean-up of the country’s banking system.

Ukrainian authorities say a $5.6 billion hole had been left in PrivatBank’s finances due to lending practices under Kolomoisky’s ownership. Kolomoisky disputes that and has taken legal action in Ukrainian courts seeking to overturn the nationalisation.

In a statement after the judgment, Kolomoisky said there was no fraud or loss caused to the bank and that the bank’s claims were misconceived and would ultimately fail. His statement also said he would appeal to the UK Supreme Court.

PrivatBank was nationalised in December 2016 after regulators detected the hole in its balance sheet, much of it allegedly stemming from fraudulent and related-party lending. The bank is now under new management and is trying to recover, through English and US courts, assets that it says were stolen by the previous owners.

The country’s central bank said in a statement the verdict was good news for Ukraine’s economy and taxpayers.

“The London court stood on the side of Ukraine on absolutely all counts”, columnist and investment banker Sergei Fursa wrote for website.

“The court ruled that the London court has jurisdiction. Kolomoisky’s assets remain frozen. A lawsuit against the former owners of PrivatBank should not be delayed. Until it produces a result, which is now predictable. For after such a decision of the appeal, waiting for another verdict is simply incredibly stupid. This is an unconditional victory. […] In fact, the London court called Kolomoisky a criminal. And it’s a shame that in Ukraine he is positioned differently”, Fursa claims.

Zelenskiy’s new government has been negotiating a new IMF loan programme to replace a $3.9 billion standby agreement that expires at the start of January.

But the 41-year-old president has faced scrutiny for his ties to Kolomoisky and repeatedly batted away suggestions that he would help Kolomoisky regain control of the bank or win compensation.

Kolomoisky’s former lawyer in the PrivatBank case is now Zelensky’s chief of staff.

Ukraine’s deputy central bank governor told Reuters last week that the issue had stalled talks with the IMF, and warned of the “huge danger” to Ukraine if a Ukrainian court overturned the nationalisation.

In a statement in September, the IMF did not mention PrivatBank or Kolomoisky but said Ukraine needed to tackle corruption, reduce the influence of oligarchs over the economy and minimize “the cost to taxpayers from bank resolutions.”

[Edited by Zoran Radosavljevic]

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