Ukrainian state-owned PrivatBank on December 18 filed a $600 million lawsuit in Israel as part of its worldwide effort to recover assets it says the lender’s two previous majority shareholders had allegedly embezzled.
Israeli media reported on December 19 that Ukraine’s biggest lender is suing Discount Bank in the country for allegedly helping PrivatBank’s previous owners Ihor Kolomoyskiy and Hennadiy Boholyubov stash money there.
The two Ukrainian-Israeli businessmen are listed in the lawsuit as well, according to a December 19 PrivatBank news release.
PrivatBank is seen as a test for President Volodymyr Zelenskiy’s commitment to reform and willingness to uproot deeply entrenched interests that have long impeded Ukraine’s development.
PrivatBank’s claim states that $1.2 billion of the bank’s money was embezzled and “smuggled into Israel…in a long series of systemic money transfers in 2007-2011 from the bank account” of a straw company controlled by Kolomoyskiy and Boholyubov at Discount Bank.
The claim further states the money transferred used “documents that appeared false and unreliable -- the money was toxic.”
According to PrivatBank, what transpired was “a clear case of money laundering and fraud….The questionable transfers should have aroused Discount Bank’s suspicion that they had been conducted for illegitimate purposes or as part of a money-laundering scheme.”
Kolomoyskiy has denied wrongdoing and maintains he is the rightful owner of PrivatBank.
Once the country’s largest privately owned bank, PrivatBank was nationalized in 2016 after it failed a series of stress tests and was found to have huge capital shortfalls.
U.S.-based corporate investigative firm Kroll and attorneys at AlixPartners also found a hole of at least $5.5 billion on the bank’s balance sheet.
In turn, the state injected the same amount to keep it afloat and the lender has since become the most profitable bank in the country, servicing nearly half the nation’s retail clients.
In the wake of taking over the bank, the Ukrainian government initiated litigation in numerous jurisdictions, including in the United States and Britain, to recover assets it alleges were stolen by its previous owners.
So far, PrivatBank has succeeded in keeping $3 billion in assets frozen through a lawsuit in London, while preparing to defend its claim before the High Court of Justice in England and Wales.
In the United States, PrivatBank has increased the amount of its claim before the Chancery Court of Delaware without specifying the new amount.
The initial claim alleged Kolomoyskiy and Boholyubov "used PrivatBank as their own personal piggy bank -- ultimately stealing billions of dollars from PrivatBank and using United States entities to launder hundreds of millions of dollars’ worth of PrivatBank’s misappropriated loan proceeds into the United States to enrich themselves and their co-conspirators."
Meanwhile, in Ukraine, Privatbank is battling Kolomoyskiy’s lawsuits in his bid to regain control over the lender.
An appellate court in Kyiv was on December 19 supposed to rule on the legality of the bank’s nationalization. The government had lost a ruling in a lower court on April 18.
However, the hearing was postponed until January 31 and until another case is ruled upon involving PrivatBank and two former clients who are challenging having their deposits transformed into shares during the process of nationalization.
Kolomoyskiy previously told Reuters that he expects “a fair verdict” on the case being heard in Kyiv.