Zhevaho Showed Europe “Best Ukrainian Business Practices” – And Got Away With It

The other day, a Ukrainian lawyer for oligarch Kostiantyn Zhevaho said that the case of her client’s withdrawal of $113 million from the Finance and Credit bank was futile and falsified. It is unlikely that she seriously thinks that we will believe in the accidental disappearance of 113 million, but the impunity of the boss inspires loud statements. At the beginning of the year, a French court released Zhevaho on bail of €1 million, refusing to extradite him to Ukraine. Zhevaho’s French lawyers were able to convince the court that it was impossible to ensure their client's safety in Ukraine, and that selective justice allegedly prevails in Kyiv.

Well, the Europeans really have something to say about selectivity in this story. The French court, along with the regulatory and law enforcement authorities of two other European countries, failed to notice that, in addition to the Ukrainian bank Finance and Credit, Zhevaho also buried a financial institution in Liechtenstein. Very similar “corporate” practices were used by the oligarch’s representatives, and the bank’s employees turned a blind eye to actual violations of control practices. Let us tell you how it happened in the Principality of Liechtenstein.

In 2013, Kostiantyn Zhevaho acquired Union Bank through the Liechtenstein fund Tremezzo. The supervisory board eventually included a confidant of the Ukrainian oligarch, Wolfram Kuoni, who was a member of the board of the fund and, while serving Zhevaho’s interests, also worked for the Russian Gazprombank, from which he resigned only after the start of Russia's full-scale invasion of Ukraine. The reason for the acquisition of the bank, as noted by journalists of the German newspaper Der Spiegel, was the desire to secretly finance his lifestyle and covertly buy large assets, such as a mega-yacht called Z (no, it’s not what you just thought – it stands for Zhevaho).

Shortly after the acquisition, the bank became its own and opened accounts for 16 companies related to Zhevaho. This happened at a time when the oligarch was a politically exposed person (PEP), and opening accounts for PEPs is a separate controlled procedure that involves a long and thorough review, rather than a "waving" process.

For example, according to German investigative journalists, one of the companies, Maritime Industry Ltd, registered in the British Virgin Islands, managed the money for the purchase of Zhevaho’s mega-yacht. And the oligarch’s company Waltham Ltd, registered in Belize, was supposed to transport luxury goods and replenish the oligarch’s personal credit cards. Not a bad scheme for concentrating assets and financing his whims at the expense of funds received from the operation of Ukrainian enterprises. The same was confirmed by the report of the audit company Deloitte.

According to the auditors, Union Bank employees had no idea about the “purity” of the funds managed by the oligarch. How the Financial Market Authority (FMA) of Liechtenstein also failed to notice problems during mandatory control measures is anyone's guess. Most likely, no one was interested in the fact that the relevant transactions during the acquisition and subsequent opening of accounts and the corresponding payments could be based on money laundering.

More to come. Deloitte auditors have discovered a strange transaction by Waltham Ltd worth millions of dollars to a company registered in a Balkan country. Why strange? Because there was no required collateral. The auditors’ report contained an assessment of this transfer of funds without any guarantees that they came from legitimate sources. It may be recalled here that Wolfram Kuoni, among other things, was one of the board members of the Swiss United Media Network AG. By the way, he was called a “Russian link” for a Balkan politician in the heart of Europe.

At the same time, oligarch Zhevaho himself was suspected of withdrawing $113 million in refinancing funds from the National Bank of Ukraine’s Finance and Credit Bank. And in Liechtenstein, even after the financial supervisory authority informed the bank that all relations with Zhevaho and his group had been completely blocked and operations suspended, Union Bank managed to conduct 11 more credit and debit transactions. However, there were no claims against Zhevaho himself, whereas the bank received a fine. The FMA declined to comment on the Delloite report, which is confidential. Failure of control during inspections. Well, it happens; in Ukraine, until recently, the controlling authorities also dropped their gaze.

By the way, Liechtenstein’s supervisory authorities intervened in Union Bank’s activities only after the scandalous “Venezuelan” transactions in early 2019. What they had been doing for the previous six years is a mystery. However, this became the basis for investigations by authorities in both Germany and Liechtenstein. Therefore, between 2013 and 2019, the Ukrainian oligarch could use Union Bank in any way he wanted – to open accounts, move funds, buy yachts, and so on. Interestingly, the FMA was not concerned about this state of affairs. However, a Delloite report from May 2020 shows that not everything was so transparent at Union Bank.

A separate interesting nuance is worthy of note. The well-known crypto exchange Binance expressed a desire to acquire an 82% stake in the aforementioned financial institution in 2019. This offer was prepared by Wolfram Kuoni. However, the FMA rejected the application of Binance CEO Changpeng Zhao. It is also significant why the Liechtenstein financial regulator refused to sell the majority stake in Union Bank. According to the FMA, the proposal to sell the stake for digital currency, which would be converted into Swiss francs through the Chinese-owned Liechtenstein Bank Mason, is not transparent. Importantly, if the deal goes through for Binance, Union Bank would be transformed from a traditional bank into a platform for digital currency clients. This extremely confusing deal was already too unacceptable for the FMA. Add to this the fact that the CEO of the world’s largest crypto exchange, Changpeng Zhao, subsequently resigned from his position. This happened after an investigation of the company’s activities by the US justice authorities, and Binance itself will pay a fine of $4.3 billion to the US authorities for non-compliance with financial control standards for suspicious transactions.

It was neither saved nor sold. Union Bank was quickly liquidated. The FMA failed to take the bank out of the way and failed to sell it to a Chinese crypto businessman. In short, the oligarch not only ruined the Ukrainian financial institution Finance and Credit, but also contributed to the problems that led to the liquidation of Union Bank in Liechtenstein. Meanwhile, Wolfram Kuoni, the chairman of the supervisory board of Zhevaho’s key entity Ferrexpo, has been giving one interview after another to well-known Ukrainian media. You won’t find a single question or even a mention of Union Bank in those interviews, only inspirational dreams about the future. Just as Zhevaho’s local lawyers, he is inspired by the lack of responsibility for his actions, even according to the “high European standard,” which allows him to avoid responsibility at home.

Read this article in Ukrainian and russian.