“PrivatBank” won the case against Kolomoiskyi and Boholyubov in London

“PrivatBank” has won a case in the High Court in London against its former shareholders Ihor Kolomoiskyi, Hennadii Boholyubov, and six of their offshore companies. The bank sought damages for the assets it estimated were worth more than $1.9 billion. With accrued interest, this amount has more than doubled.

This was reported by the companyʼs press service.

The bank alleged that the funds were misappropriated by providing loans to 47 Ukrainian and three Cypriot borrowers from April 2013 to August 2014. These borrowers then entered into agreements with supplier companies. According to “PrivatBank”, these agreements were fictitious and provided for the supply of goods or industrial equipment — and on the condition of full prepayment.

The bank claimed that no goods were delivered for the $1.9 billion advance payments, and the suppliers did not return the advances to the borrowers. The borrowers also did not return the loans to the bank for this amount, so the bank demanded $1.9 billion from Kolomoiskyi and Boholyubov as compensation for damages. The full amount with interest will be significantly higher.

Judge Trauer rejected Kolomoiskyi and Boholyubov’s claims that there was “no evidence” linking the bank’s former owners to the transactions described. He found that their denials were “completely based on dishonesty”. The judge also found that Kolomoiskyi “appeared to consider himself above the law” and that it was “dishonest on Boholyubov’s part” to use misleading documents to distance himself from the fraud.

“PrivatBank” and its legal advisors will now move to the damages stage. They will seek to enforce the court’s judgment against these assets to obtain compensation for the bank and its shareholder, the government of Ukraine.

Nationalization of “PrivatBank” and the court

In 2016, the National Bank, under the leadership of Valeria Hontareva began to reform the banking market and, among other things, analyzed the capital of banks using a methodology it developed with IMF. The National Bank found a “black hole” in PrivatBank’s capital: it arose because 97 percent of PrivatBank’s loans were issued to “related parties,” most of whom were companies without assets and cash flows. Valeria Hontareva spent a long time persuading shareholders to “put” real assets into the bank, and the shareholders fought a positional battle with her.

In December 2016, the National Bank of Ukraine declared “PrivatBank” bankrupt and proposed to the Cabinet of Ministers to nationalize it. On the same day, the National Security and Defense Council, headed by Poroshenko, proposed to the government to recapitalize the bank from the budget, and to the Deposit Guarantee Fund (DGF) and the National Bank to monitor the stability of the financial system. Poroshenko put the National Security and Defense Council’s decision into effect by presidential decree. After that, the Cabinet of Ministers decided to nationalize “PrivatBank”.

The FGV was responsible for the nationalization, it appointed a temporary board of “PrivatBank”. After that, it carried out a bail-in: it forcibly converted money in the accounts of “related persons” into shares of the bank’s capital.

Under Ukrainian law, “related persons” declare their relationship themselves — or NBU establishes this relationship. In this case, the relationship was established by the Department for Monitoring Persons Related to Banks, which Valeria Hontareva created in June 2015. Five days before the nationalization, a special commission of the NBU issued Resolution No. 105, which listed 1,092 such “related persons”.

The DGF conducted a bail-in and then sold 100 percent of “PrivatBank” capital to the Ministry of Finance for one hryvnia. After that, the Ministry of Finance recapitalized PrivatBank by $5.8 billion.

Then, the state-owned “PrivatBank” sued its former shareholders — Ihor Kolomoiskyi and Hennadii Boholyubov — for fraud, and demanded compensation for $1.9 billion in losses with interest.

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