Kreller Hot Topic Report | Steal Country: The Case of Ukrainian Money Laundering in Northeast Ohio

Posted By:
Kreller Group
September 23, 2019

By Lauren Caryer

The Largest Case of Money Laundering in History

On January 12, 2016, an all too familiar story appeared in Youngstown’s Business Journal: Warren Steel Holdings LLC would be shuttering a steel plant located just north of Warren, OH, a town in the heart of the so-called Steel Valley, situated midway between Cleveland and Pittsburgh. The company reportedly cited the usual factors contributing to the plant’s closure and the loss of 150 jobs, “weak demand in the steel industry” and a “lack of financing” for the plant’s operations. At first glance this news registers as just another example of the economic decay afflicting the Rust Belt. However, a steady drip of civil suits has shown that Warren Steel may also be sign of another dismaying trend, that of misappropriated international funds increasingly permeating unlikely segments of the U.S. economy through anonymous Delaware LLCs.

These cases, including two pivotal civil suits, filed in May and August of this year in the Delaware Court of Chancery, tell the tale of what has been described in a June 4, 2019 article by the Atlantic Council as potentially “the biggest case of money laundering in history,” involving individuals and entities located in Ukraine, Cyprus, the British Virgin Islands, Miami, Delaware, Dallas, and various locations across the industrial Midwest. The May 21, 2019 suit, filed by the Ukrainian bank, PrivatBank, alleged that from 2006-2016, the bank’s previous owners, Igor Kolomoisky and Gennadiy Bogolyubov, laundered $470 billion dollars through the bank’s Cypriot branch (a figure roughly double the entire GDP of Cyprus for that time frame), and misappropriated the funds into various commercial assets in the United States owned by Delaware LLCs, ultimately controlled by Kolomoisky and Bogolyubov.

As the Atlantic Council article notes, the 104-page complaint functions as “probably the most detailed study of large-scale money laundering into the United States.” The complaint, which arose after the bank’s 2016 nationalization, in the wake of its fraud-induced near collapse, offers a unique window into the 4-step process by which a financial institution’s funds can be stolen by its principals, obscured through a labyrinthine laundering process, funneled into offshore commercial assets, and the whole process hidden through a system of loan recycling.

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