August 1, 2018 / 5:21 PM / 4 months ago

UPDATE 1-Ex-shareholders in Ukraine's PrivatBank say disproving some fraud allegations is complicated

(Updates, recasts after Kolomoisky’s lawyer issues statement)

By Dasha Afanasieva and Matthias Williams

LONDON/KIEV, Aug 1 (Reuters) - Lawyers representing two former owners of Ukraine’s biggest lender PrivatBank denied on Wednesday all allegations of fraud made by the bank but said proving that $248 million was not misappropriated would be complicated.

The lawyers’ statement followed a court hearing over the past week, challenging a worldwide freeze on the two former owners’ assets. It was part of a broader dispute in which PrivatBank has claimed that before it was nationalised in 2016 nearly $2 billion of the bank’s money was misappropriated.

The former main shareholders, Ihor Kolomoisky and Gennadiy Bogolyubov, have rejected the claims in the case, which is seen as a litmus test in Ukraine’s battle against corruption.

Kolomoisky’s lawyer, Andrew Lafferty, said that Kolomoisky and the other defendants maintained that all of PrivatBank’s claims were misconceived, but that proving $248 million was returned to the bank was a more complicated exercise which would be undertaken if the case goes to trial.

The Ukrainian authorities took PrivatBank into state hands in December 2016 and have spent nearly $6 billion so far to plug a hole in its balance sheet, caused by what the government alleges were fraudulent lending practices and money laundering.

“They strenuously deny any fraud, or that the bank has suffered any loss of funds,” Lafferty, partner at law firm Field Fisher, said in an emailed statement.

At the court hearing, lawyers for Kolomoisky and Bogolyubov were seeking to stop a worldwide freezing order on their clients’ assets and to stop the case being heard in an English court.

For the purpose of the hearing the lawyers for the shareholders did not contest that some of the money may have been misappropriated but not almost $2 billion as argued by the bank.

“We say they could put forward a good arguable case for a loss of $248 million,” Mark Howard, the barrister representing Kolomoisky said, according to a transcript from the hearing.

Commenting after the end of the hearing, Lafferty said Kolomoisky also contended that this money was returned to the bank, and that the bank has therefore suffered no loss at all but that it was a more complicated exercise to show this.

Skadden, the law firm working for Bogolyubov, did not immediately respond to a request for comment on Wednesday.

Former Finance Minister Oleksandr Danylyuk has said that lawsuits surrounding the bank were a “litmus test” for the effectiveness of Ukraine’s battle against corruption, which Kiev needs to succeed if the country is to retain the backing of its foreign creditors.

Kolomoisky and Bogolyubov have long disputed the assessment by the central bank and the government of PrivatBank’s finances and say it was nationalised for political reasons.

Recovering some of the PrivatBank money the government claims was lost would help shore up Ukraine’s finances as time runs out for the government to secure more aid from the International Monetary Fund to help service its growing debt.

Editing by Susan Fenton

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