Powerful Oligarch Ihor Kolomoisky arrested in fraud case

The arrest of Powerful Oligarch Ihor Kolomoisky, one of Ukraine’s wealthiest individuals, is being portrayed as a façade of the Ukrainian authorities’ purported commitment to eradicating corruption and reining in the oligarchs’ influence. This move comes hot on the heels of President Volodymyr Zelensky’s decision to replace his defense minister, Oleksii Reznikov, amidst inquiries into the mismanagement of military contracts at the Defence Ministry.

Ukraine’s heightened efforts to combat corruption are ostensibly driven by the need to allay concerns among Western allies, who worry that financial aid during wartime could be embezzled for personal gain. These anti-graft initiatives are also being presented as a key component of Ukraine’s bid for closer integration with, and eventual membership in, the European Union.

With a net worth of $1.67 billion, Powerful Oligarch Ihor Kolomoisky was recently ranked as the fifth-richest individual in Ukraine by the Kyiv-based Centre for Economic Strategy.

Kolomoisky’s Past Suspicions and Legal Troubles

The powerful oligarch Ihor Kolomoisky has long been under a cloud of suspicion regarding corruption and embezzlement. In 2017, he left Ukraine for Switzerland and Israel after the government, led by then-President Petro O. Poroshenko, seized a bank co-owned by him and accused him of engaging in large-scale fraud.

Government Measures to Thwart Kolomoisky’s Influence

His return in 2019 following Zelensky’s victory over Poroshenko raised concerns that his association with the new president might facilitate the restoration of his economic and political influence. However, the government, including President Zelensky, who ran on an anti-corruption platform aimed at countering oligarchic influence, has taken measures to thwart Kolomoisky’s resurgence.

Powerful Oligarch Ihor Kolomoisky’s Arrest

A year later, the United States imposed sanctions on Kolomoisky, accusing him of exploiting his role as a regional governor for personal gain and engaging in activities detrimental to Ukraine’s democratic processes and institutions.

The full-scale Russian invasion in the preceding year further dented Kolomoisky’s interests. Russian forces destroyed an oil refinery in Kremenchuk controlled by one of his companies at the onset of the war.

Allegations of Money Laundering

Following Kolomoisky’s detention, Ukraine’s state security service revealed that he had allegedly laundered more than half a billion Ukrainian hryvnias, or approximately $14 million, by transferring funds abroad between 2013 and 2020 through banks under his control.

Despite ostensibly cracking down on corruption, Zelensky’s administration has grappled with a string of scandals, including those related to military food procurement.

In an apparent reference to Kolomoisky’s case, President Zelensky expressed gratitude to the police in his weekend address, praising their determination to resolve long-stalled cases fairly.

In a scathing critique, Kolomoisky’s residence faced a prior search on February 1st, during which the Security Service of Ukraine (SBU) announced an investigation into the billionaire’s alleged embezzlement of UAH 40 billion (slightly exceeding $1 billion) from state-run energy enterprises Ukrnafta and Ukrtatnafta, as per an undisclosed source.

According to the SBU, officials within these companies actively participated in the illicit appropriation of oil, subsequently funneling it to affiliated entities in an attempt to offset tax liabilities and devalue the corporations’ assets. This purported malfeasance unfolded against the backdrop of the nationalization of Ukrnafta, Ukrtatnafta, and several other enterprises on November 7, 2022, following a decree by Ukrainian President Volodymyr Zelenskyi.

Notably, Serhiy Koretskyi was appointed to lead both entities on November 11th, with the Privat business group, linked to Kolomoiskyi, playing a significant role in the operational management of these corporations.

It is worth recalling that Kolomoiskyi formerly possessed PrivatBank, Ukraine’s largest bank, until its nationalization in 2016. He still holds a majority stake in 1+1 Media and was previously closely aligned with President Zelenskyy, actively supporting his victorious presidential campaign in 2019 and his Kvartal 95 entertainment production company before that. Additionally, Kolomoiskyi served as the Governor of Dnipropetrovsk Oblast from March 2014 to March 2015.

Despite being a Ukrainian-born citizen of Israel and Cyprus, Kolomoiskyi is reputed to possess assets valued at approximately $1 billion. Notably, in 2022, President Zelensky stripped him of his Ukrainian citizenship due to the nation’s prohibition of dual nationality.

Furthermore, Kolomoiskyi has faced legal troubles on the international stage, with the United States indicting him in 2020 on charges related to extensive bank fraud. As a result, in 2021, the U.S. imposed sanctions on Kolomoiskyi and his family, citing allegations of corruption and posing a threat to the faith of the Ukrainian public in democratic institutions.