London court rejects Kolomoisky and Boholyubovʼs appeal. They must pay over $3 billion to “PrivatBank”

The Court of Appeal in London has rejected the appeal of former owners of “PrivatBank” Ihor Kolomoisky and Hennadii Boholyubov. They must pay “PrivatBank” more than $3 billion.

This was reported by “PrivatBank”.

The High Court of England and Wales ruled last July. “PrivatBank” claimed that the defendants misappropriated funds through loans the bank provided to 47 Ukrainians and three Cypriots from April 2013 to August 2014.

These borrowers entered into contracts with suppliers on the condition of full prepayment for the goods to be delivered. However, “PrivatBank” emphasized that no goods were ever delivered.

The appeal rejected the former ownersʼ arguments that they returned the funds because it turned out they had obtained them through further fraudulent actions against “PrivatBank”.

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” 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 Petro 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”.

DGF 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 the 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”.

DGF conducted a bail-in and then sold 100% 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 Kolomoisky and Hennadii Boholyubov — for fraud and demanded compensation for $1.9 billion in losses with interest.

In July, the High Court of London ruled in favor of “PrivatBank” and its shareholder, the government of Ukraine.

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