The High Court in London held a five-day hearing in relation to JSC CB PrivatBank’s claim against Messrs Igor Kolomoisky and Gennadiy Bogolyubov, the bank’s former shareholders and officers, and six companies they are alleged to control. Shortly before the case came to be heard, the defendants abandoned approximately half of the arguments they were scheduled to make. Those concessions included accepting that the Bank has established a ‘good arguable case’ of fraud against them and that there is a real risk that they will dissipate their assets unless prevented from doing so by a freezing order.
The hearing in the High Court commenced on Wednesday, 25 July and concluded on Tuesday, 31 July 2018 before Mr Justice Fancourt. During the course of the hearing, the Bank presented the High Court with detailed arguments and evidence in relation to its claim and the worldwide freezing order that was granted in support of it.
The claim that forms the basis for the freezing order involves allegations that Messrs Kolomoisky and Bogolyubov misappropriated US$1.9bn from the bank in 2014 through a series of sham transactions, which had the effect of transferring funds to companies that they secretly owned or controlled. During the hearing, PrivatBank’s lead barrister, Stephen Smith QC, explained that, between April 2013 and August 2014, Messrs Kolomoisky and Bogolyubov orchestrated a scheme involving fraudulent loans to 46 borrowers, payments under 54 sham "supply agreements" for the provision of wholly improbable volumes of commodities, such as manganese ore, PET and apple juice concentrate, and loan recycling schemes to seek to disguise the fraud.
The loans were granted without proper approval or due diligence processes, whilst the supply agreements were produced as a façade to enable $1.9 billion to be paid to six companies: TEAMTREND LIMITED, TRADE POINT AGRO LIMITED and COLLYER LIMITED (all English companies), and ROSSYN INVESTING CORP, MILBERT VENTURES INC and ZAO UKRTRANSITSERVICE LTD (all BVI companies). None of the companies had websites, offices, staff, warehouses, a workforce or any other public presence. The scheme was the brainchild of Messrs Kolomoisky and Bogolyubov who at the time were the owners of more than 90% of the shares in the Bank and sat on its supervisory board.
Yaroslav Matuzka, PrivatBank’s Head of Legal said: “This has been an important hearing and a significant step in the Bank's efforts to obtain proper compensation for the funds misappropriated by its former owners. We are confident that the High Court in London will be impartial and fair when reviewing the matters put before it."
Richard Lewis, Partner, Hogan Lovells, acting for PrivatBank, said: “The strength of the Bank's claims is reflected in the Defendants' acceptance that it has a good arguable case of fraud against them. The Bank has full confidence in the English court to do justice between the parties."