PrivatBank, Ukraine’s largest bank, has scored a landslide win in its high-stakes, long-running litigation against former owners Igor Kolomoisky and Gennady Bogolyubov. The judgment represents a comprehensive victory for the Bank, which was nationalised by the Ukrainian Government in December 2016. At the time of nationalisation, the Bank was undercapitalised by approximately US $5.5 billion, and subsequently recapitalised by the state.
In a judgment handed down today, the High Court in London found the two men to have misappropriated almost US $2 billion from the Bank via a “a highly complex loan recycling scheme which operated for the ultimate benefit of the Individual Defendants [i.e. Mr. Kolomoisky and Mr. Bogolyubov]”. The judgment against them could hardly be more damning, setting out the scheme of what has previously been described as a “fraud of Byzantine complexity”.
Rejecting the contention of Messrs. Kolomoisky and Bogolyubov that there was “not one shred of evidence” to link the Bank’s former owners to these transactions, Mr Justice Trower found that their case was “all built on dishonest foundations”. The Judge also found that Mr Kolomoisky “seems to have regarded himself as above the law” and that it was “dishonest for Mr Bogolyubov” to use misleading documents to seek to distance himself from the fraud.
The full amount of the former owners’ liability to the Bank is still to be determined, but given the court granted the Bank’s claims in full, they are likely to be held liable for more than US $1.7 billion even before the addition of more than a decade’s worth of interest. The full amount payable to the Bank, including interest and costs, will be determined at a further hearing later in the year and is likely to be well in excess of US $2 billion.
Neither Mr. Kolomoisky nor Mr. Bogolyubov gave evidence at the 2023 trial in London, with Mr. Kolomoisky spending part of that period under temporary detention in Ukraine. The Judge found that their refusal to give evidence was because “they both recognised that by giving evidence in person they would expose themselves to questioning about their role in the Misappropriation to which they would have had no credible exculpatory answer and they therefore chose to decline to do so”. So far as the documentary evidence before the court was concerned, the Judge held that “Mr. Kolomoisky took deliberate decisions to procure the destruction of data which was capable of being relevant to the current proceedings” and remarked upon “the practice adopted by Mr Bogolyubov of destroying documentation which would have been relevant to these proceedings”.
In 2017 PrivatBank obtained a Worldwide Freezing Order over the defendants’ assets. The Bank and its legal advisors will now move on to the recovery stage of the legal process and seek to enforce the judgment against those assets to obtain compensation for the Bank and, by extension, its shareholder, the Ukrainian Government.
The Chairman of the Supervisory Board of PrivatBank, Mr. Nils Melngailis, said: “This is a monumental victory for the Bank and our shareholder – the Government of Ukraine, as well as for the millions of Ukrainians who rely on PrivatBank every day. It demonstrates the lengths to which the Bank will go to protect the interests of its depositors, clients, personnel, taxpayers as well as the rigor of our corporate governance standards. We are grateful for all of the support we have had from our stakeholders throughout the process. The evidence overwhelmingly supported today’s conclusion that billions of dollars were unlawfully misappropriated in what was effectively a sustained and systematic fraud, vindicating our decision to relentlessly pursue this claim over several years. This decision underlines the strength and integrity of Ukraine’s most trusted financial institution and we believe that it will be the first in a series of victories internationally that will secure justice for the Bank and, more importantly, for the people of Ukraine. This is not the end of our process as we will now commence recovery of the amounts rightfully owed to PrivatBank”.
Richard Lewis, partner at Hogan Lovells, the law firm representing the Bank in the proceedings, said: “The trial was one of the most complex actions to take place before the English courts. The Bank presented extensive evidence to the court detailing how billions of dollars were misappropriated from it for the benefit of Mr Kolomoisky and Mr Bogolyubov. We are delighted that the court saw through the defendants’ attempts to justify their conduct and granted the Bank’s claims in full over the course of an extremely thorough and detailed judgment, which found that they put forward dishonest evidence, deliberately destroyed and suppressed documents and sought unsuccessfully to shift the blame onto others”.
PrivatBank is the largest state-owned Bank of Ukraine. The Bank serves over 18 million active customers, while over 70% of Ukrainians use its services. The Bank is the leader in retail banking, introduces new and upgrades existing services for small and medium businesses, has created a strong digital ecosystem and a wide network of over 1,186 branches, 6,850 ATMs, nearly 10,400 self-service terminals and over 308,000 POS-terminals across the country. Over 19,000 employees make up the PrivatBank's team. PrivatBank works to drive Ukraine's economy, support the residents and the businesses despite the war.
