In the conditions of a total shortage of funds for the war and social expenses and dependence on foreign financial aid, Ukraine’s government does not use all of the opportunities for additional replenishment of the state treasury.

One such source could be the assets of Ukrainian oligarchs who have been withdrawing funds from the country for the past 10-15 years. For example, the damages caused by the activities of former owner of Delta Bank Mykola Lahun are estimated at $1.2-1.4 billion. Instead, the state seems indifferent to such a possibility, actually tolerating the attempt to avoid debt payment.

At the end of April 2024, it became known about the transfer to Ukraine of the first batch of military aid from the U.S. government as part of a large package worth $61 billion.

The cost of the batch is about $1 billion. It included missiles for air defence systems, ammunition for HIMARS, TOW anti-tank missiles, Javelin anti-tank systems and anti-tank grenade launchers, Bradley and other armoured vehicles, HMMWVs and logistic support vehicles, high-precision aviation ammunition, airfield support equipment, mines, minesweeping equipment, night vision devices, machine gun and other ammunition, spare parts, etc.

This long list gives an approximate understanding of the amount of weapons that can be purchased for $1 billion. Each such billion is very important for Ukraine today.

Instead, having the opportunity to receive a similar and perhaps even larger amount of funds for the needs of the army through the payment of debts of one of the tycoons, the authorities seem to ignore it.

The matter concerns the high-profile case of the former owner of Delta Bank, businessman Mykola Lahun, who caused losses of at least $1.2 billion to Ukraine in the period since the beginning of the 2010s and is now hiding in Austria.

Instead of collecting debts from Lahun, the courts in Ukraine systematically lead him to personal bankruptcy – a relatively new procedure that allows to partially or completely get rid of the debts of an individual and in fact – in the case of Lahun – transfer them to the shoulders of taxpayers.

Lahun is the second largest source of damage to the state after the controversial oligarch Ihor Kolomoisky.

However, if since the beginning of the 1990s, the owner of Privat Group had assets in the real sector of the economy, including oil and gas, metallurgical, mining industries, then the banker Lahun actually inflated his fraudulent bubble solely on the basis of financial abuses.

At the same time, he began to hide his assets in Western jurisdictions from the end of the 2000s and did it skilfully, not without the help of the leadership of the National Bank of Ukraine (NBU). His schemes reached their peak during the presidency of Viktor Yanukovych.

The photo(left) demonstrates one of such cases, namely a financial receipt, which gives an idea of the amounts with which Lahun operated during these years.

Who is Mykola Lahun and what is he accused of?

“The rise and bankruptcy of Delta Bank is usually described in two ways. One story is about an audacious businessman who was unlucky.

The other is about a bunch of swindlers who, until the right opportunity, successfully imitated the booming banking activity,” the Ukrainian edition of Forbes wrote about Lahun in September 2020, narrating the entrepreneur’s story.

According to the publication, in the early 2000s, Lahun owned 10% of Ukrsotsbank, when the son-in-law of Ukraine’s ex-president Leonid Kuchma, Viktor Pinchuk, bought it from another oligarch, Valeriy Khoroshkovsky.

He also borrowed money from Pinchuk to create his own financial institution. Delta Bank was launched in 2006 with a bet on the market of POS loans at 50-80 percent per annum in household appliances stores.

After the crisis of 2008, when it became more difficult to issue such loans, Lahun began to build a model of a “normal” bank by buying other financial institutions.

For example, in 2010, in this way the American corporation Cargill became a shareholder of Delta Bank – it worked with Ukrprombank, which Lahun bought. Subsequently, he also acquired the medium-sized Kreditprombank, which was supposed to be his pass to corporate clients from Donbas (the industrial heartland of Ukraine), as it belonged to the second-tier tycoons there. Later, he bought several more banks, accumulating debts.

Lahun’s Delta Bank became an exact copy of Russia’s Delta Bank, because it was created on the initiative and with the funds of the Russian investment fund Icon Private Equity, which at that time was headed by Kirill Dmitriev.

Image: www.kremlin.ru

Nowadays, Kirill Dmitriev is one of the top Russian officials closest to Putin and is under U.S. sanctions.

The first problems appeared immediately with the outburst of the Revolution of Dignity, when depositors started to withdraw their funds from the bank.

By the end of the year, half of the loan portfolio was classified as NPLs.

The bank started to obtain the refinancing from the NBU. The total amount of the NBU loan was 9 billion hryvnas. Half of the funds were converted into foreign currency and taken abroad. After the occupation of Crimea, the loans of the clients there were lost. The same fate awaited the bank’s portfolio in Donbas.

Despite the partnership with Cargill, the situation worsened, the bank did not find money for its own recapitalisation. Delta Bank continued to “suck” refinancing from the National Bank. Crowds of depositors began to gather near the bank’s offices following rumors of Lahun’s arrest.

At the end of October 2014, the NBU declared the bank insolvent and appointed a supervisor. The National Bank was ready to nationalise the bank – Ukraine’s parliament even allocated about $1 billion for recapitalisation. However, the problems were so deep that in March 2015 the bank was withdrawn from the market.

Further investigations showed that Lahun and the bank’s management had been systematically deceiving the regulator since 2011 by creating dozens of fictitious offshore companies to withdraw funds. The bank’s authorised capital increased only on paper. The bank’s international accounts were emptied back in 2013, while false confirmations of available money were submitted to the NBU.

Working loans “collapsed” with large deposits of companies, because of which rights of claim for dozens of loans in the mortgage institution and Oschadbank were lost, which was later recognised as illegal. A number of assets were bought without document analysis. To withdraw deposits during the crisis, they were “shredded” into smaller amounts. Even at the end of 2014, the bank continued to withdraw funds through the foreign institutions Bank Winter, Meinl Bank, and Bank Frick.

According to the estimates of the Deposit Guarantee Fund of Ukraine, the total losses caused by Delta Bank and Lahun due to the payment of bank deposits by the fund, unrepaid refinancing loans, withdrawn pledges, debts to state banks as of 2019 were estimated at UAH 36 billion (at that time, about $1.4 billion). The amount of damage, which can be determined based on media publications of materials of criminal proceedings, is commensurate – about $1.2 billion.

According to the data of the Ukrainian edition NV, Lahun has a number of active businesses both in Ukraine and in Crimea that are not controlled by the Ukrainian authorities. For example, the matter concerns housing estates in Yalta, agricultural companies, thousands of hectares of agricultural land near Sevastopol that were registered under Russian law.

“Lahun could retain his land ownership on the leased land, and at the same time not lose the shares of the company itself, only if he had (and still has) Russian citizenship”, NV journalists said. In addition, according to the data of open registers,

Mykola Lahun is directly or indirectly affiliated with a number of companies that were created in the period from 2004 to 2012 with the participation of him and his sister Antonina – these are construction, development, and financial businesses.

The bankruptcy case

Despite the fact that the abuses and damage caused by Lahun had long been known, his affairs invigorated only during the second year of Russia’s full-scale invasion of Ukraine.

The Prosecutor General’s Office of Ukraine upholds the state prosecution in three major proceedings, which were sent to court only in 2023. They are related to the embezzlement of large sums of money and tax evasion.

In one of the cases – № 761/8406/23 – Lahun was finally declared wanted in October 2023 for failure to appear in court. Although, for example, the head of the board of his bank, Olena Popova, has been on the wanted list since 2017.

Lahun himself is not standing idly by. In the summer of 2023, he decided to declare himself bankrupt as an individual in order not to pay all the debts owed to various creditors. The statement refers to the impossibility of repaying debts for UAH 7.7 billion. It is proposed to write off liabilities in the amount of about UAH 6 billion, since the current financial situation allegedly does not allow the banker to pay off the debts.

The list of property that Lahun proposes to use for settlements with creditors includes apartments and land plots in Crimea, land plots in Kyiv and Chernihiv regions, securities of companies related to Delta Bank, as well as a collection of wristwatches of dozens of different brands, including Omega, Panerai Luminor, Rolex, Greubel Forsey, Audemars Piguet, F.P. Journe, Girard Perregaux and others. A total of 240 watches were seized within one of the criminal proceedings. In addition, it is known from media reports that Lahun got a job in 2022 and transfers his “salary” of UAH 14,000 per month to repay the debt to the state-owned Oschadbank, which reaches UAH 4.5 billion.

However, it seems that the list of property belonging to the financier is significantly underestimated. In 2019-2020, the Deposit Guarantee Fund hired the international company DWF Law to search for Lahun’s foreign assets. However, they will be ready to publicize the results of its work only in the event of a public dispute about bankruptcy, to which the fund will be a party.

“Back in 2021, Iryna Venedyktova, who at that time held the post of prosecutor general, announced the seizure of Lahun’s assets in the amount of almost UAH 790 million. In particular, the matter concerns 200 land plots in different regions of Ukraine, and $1 million was also “frozen” in an account in one of the Swiss banks,” the mind.ua publication said. Lahun’s business in Crimea and in the controlled territory of Ukraine, which is registered with his relatives, is still operating.

The Economic Court of Kyiv initially refused to open a case at the request of Lahun. However, the Northern Court of Appeal – the court of the second instance – canceled this decision and instead decided to refer it again to the Economic Court of Kyiv for review.

Currently, the case has been requested by the Court of Cassation of the Supreme Court based on the complaint of the National Bank and the state Ukrexim bank. This is the third instance of appeal. May 28, 2024, the Court of Cassation started hearings on allowing Lahun’s case of bankruptcy to be initiated providing him a chance of writing off his debts. The final Court decision is expected to be announced end of June.

If a bankruptcy case is opened, the court will have to introduce a moratorium on meeting the demands of all creditors, as well as appoint a manager for debt restructuring.

This will mean that the return of more than $1.2 billion in debts that Lahun now owes to the state of Ukraine and which are so necessary for defence and ensuring financial stability in conditions of constant dependence on foreign financial aid will become even more illusory. Instead of real assets, the state will receive “virtual watches,” which looks more like a slap in the face than a real solution to the debt issue.

It is worth noting that at the same time, the financier’s lawyers are trying to use the so-called “Lozovoy amendments” (a number of amendments to the Criminal Procedure Code of Ukraine proposed by MP Andriy Lozovoy) to close as many criminal cases as possible based on the expiration of the statute of limitations for their investigations.

This will allow Lahun to live a quiet life in the West in the future, use foreign assets and possibly even create new businesses. After all, his criminal history will be clean​ed up, and his reputation can become spotless again.

The example of oligarch Ihor Kolomoisky, who also brought the huge PrivatBank to a pre-bankruptcy state and was accused of multibillion-dollar abuses, demonstrates that political will is capable of bringing to justice financial fraudsters larger than Lahun.

In addition, the Ukrainian media have repeatedly pointed to the fact that law enforcement agencies are able to achieve significant results in other cases, for example, that of the agricultural baron Oleh Bakhmatiuk, who is also hiding in Vienna.

Since state officials also helped Lahun to loot the bank and state refinancing funds, we can’t but agree that in this situation, the intensification of the investigation into the case by the National Anti-Corruption Bureau of Ukraine could significantly weaken the position of the former banker and minimise the risks of getting away with this, speed up the search and confiscation of international assets.

So, amid the constant search for new sources for external financing of the huge budget deficit and the army’s desperate need for weapons, the question arises, why are the Ukrainian authorities actually ignoring how the former owner of Delta Bank escapes responsibility?

Main Image: By Ruslsaz – Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=35637734

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