DOJ Seeks to Confiscate US Properties Tied to Ukrainian Oligarchs

August 9, 2020 Updated: August 9, 2020

The Department of Justice (DOJ) has asked a federal court in Florida to allow forfeiture of two properties owned by associates of Ukrainian oligarchs Ihor Kolomoisky and Gennadiy Boholiubov worth a combined $70 million. The DOJ alleges the properties were purchased with money stolen from a Ukrainian bank the oligarchs used to own.

Kolomoisky and Boholiubov denied stealing the money.

The forfeiture complaints, filed on Aug. 6 with the U.S. court in the southern district of Florida, target the PNC Plaza office tower in Louisville, Kentucky, and a Dallas, Texas, office park known as the former CompuCom Headquarters.

The complaints follow an Aug. 4 FBI raid at offices in Cleveland and Miami tied to the same investigation.

The DOJ alleges that Kolomoisky and Boholiubov siphoned over $5 billion from PrivatBank, one of the largest banks in Ukraine, before it was expropriated by the Ukrainian government in late 2016.

The oligarchs set up a special office at the bank to approve fraudulent loan applications from entities the oligarchs themselves controlled, the complaints allege. The money was then funneled through a web of shell companies that used accounts at PrivatBank’s Cyprus branch “to thoroughly disguise their nature, source, ownership, and control,” the complaints say.

The money was then invested into companies and properties, including the two buildings in Louisville and Dallas, controlled by Kolomoisky and Boholiubov, the allegation states.

The loans were seldom repaid, DOJ said, except through new loans or sometimes proceeds from the investments.

Collateral for the loans was overvalued, according to the Ukrainian central bank. Part of the collateral, for example, was a Soviet-era petroleum storage depot in Artsyz, 373 miles south of Ukrainian capital Kyiv. PrivatBank valued it at more than $12 million, but the central bank considered it worthless, according to the central bank’s assessment seen by Reuters.

A Reuters reporter who visited the depot found sheep grazing there and was told by Artsyz Mayor Volodymyr Mikhov: “It has not operated for at least 10 to 15 years.”

Kolomoisky and his representatives previously said the loans weren’t bad and could still be recovered, Financial Times reported. The Ukrainian government said it had to bail out the bank to the tune of $5.5 billion. At the time, the Ukrainian economy was kept afloat by more than $7.6 billion in International Monetary Fund (IMF) loans (pdf).

Last year, the bank raised the fraud and money laundering allegations against Kolomoisky and related businesses and persons in a Delaware lawsuit (pdf) that appears to have since gone nowhere.

Kolomoisky, meanwhile, is fighting the PrivatBank nationalization in Ukrainian courts, demanding compensation.

The IMF, which in June promised Ukraine another $5 billion in loans, has insisted PrivatBank’s nationalization should not be reversed.

Ukrainian President Volodymyr Zelensky made his fame playing a president on a comedy TV show that ran on a channel owned by Kolomoisky, who backed his candidacy. Zelensky has been accused by opponents of having ties to Kolomoisky that are too close, which he has denied.

Forbes estimates Kolomoisky’s fortune at $1.1 billion. For one year, in 2014-2015, he was the governor of Dnipropetrovsk Oblast in eastern Ukraine. He was reportedly praised by Ukrainians for rallying volunteer militias to fight against Russia-backed separatists in the region.

Reuters contributed to this report.

Follow Petr on Twitter: @petrsvab