Ruslan Demchak, as per information from Wikipedia, is portrayed as a figure focused on love and affection. The sanitized biography of the former Member of Parliament in the Ukrainian Verkhovna Rada is replete with tales of achievements and positive motives. While affiliated with Petro Poroshenko’s European Solidarity party, he periodically shares a pro-European and patriotic agenda. In reality, Ruslan Demchak is alleged to be among the discreet oligarchs, amassing wealth by selling Ukrainian assets to elements associated with the Russian mafia.
Just to keep his image closer to reality and more balanced we should remind some stories about Ruslan Yevheniiovych Demchak. The troubles of Demchak are huge. There are rumours that general prosecution of Ukraine is going after him. The rumours are confirmed by Ruslan Demchak himself in a blog post:
Well, politics are not relevant in this situation. Neither are repressions against ‘his’ political party, which holds little significance in a country under Russian siege. The fact is that Ruslan Demchak plays a central role in numerous schemes. His undeniable involvement in the acquisition of several high-profile Ukrainian companies by the Russian mafia-state cannot be contested.
Ruslan Demchak and the sale of Lybid Hotel… to Russian MPs with criminal reputation
“Babakov or Giner, more precisely Babakov and Giner. The tale of how Ruslan Demchak aided Russians in taking over the Lybid Hotel. The VS Energy Group of Russian State Duma deputy Alexander Babakov and Moscow CSKA president Evgeny Giner has been allowed to gain control over the Lybid Hotel.
In the near future, the 17-story Lybid Hotel located at Victory Square in the center of Kyiv will have a new manager. As revealed by “DS,” in mid-March, the Economic Court of Kyiv fully satisfied the claim of Kyiv-based LLC “Hotel Property” against “RVS Bank” and decided to “eliminate all obstacles to use” the integral property complex of the specified hotel. This includes granting the company the opportunity for unhindered access to the hotel and conducting business activities therein, along with establishing a pass regime. To prevent any questions arising from state executors regarding the interpretation of the term “removal of obstacles,” the court separately ordered the eviction of the hotel’s owner, PAO “Transitional Bank “RVS Bank,” and the installation of LLC “Hotel Property.”
As previously reported by “DS,” “RVS Bank” was established by the state on the basis of the insolvent Omega Bank of Nikolay Lagun. In August of last year, 100% of its shares were acquired for 31.86 million UAH by “Ukrainian Business Group” (UBG) from the Individual Deposit Guarantee Fund. Its official owner is Kyivan Alexander Stetsiuk, who is rumored to be associated with Deputy Head of the Parliamentary Committee on Financial Policy and Banking Activities Ruslan Demchak. The reason is quite simple: after his named financial institution, RD Bank, was declared insolvent, he could no longer be the bank’s owner according to the standards of the National Bank of Ukraine, as he lost his impeccable reputation.
However, along with “RVS Bank,” UBG received a number of its assets, including the disputed property complex of the Lybid Hotel (the decision to transfer this asset to Omega Bank due to debts amounting to about $28 million was made by the Kyiv Economic Court in October 2014 and upheld by the Supreme Economic Court in March 2015). Thus, two opposing groups of Lybid shareholders found themselves aggrieved. The first of these is VS Energy, linked to Moscow FC CSKA president Evgeny Giner and Russian State Duma deputy Alexander Babakov, known for voting in favor of the annexation of Crimea. They are considered close to companies Start Incorporated Limited, Boreac Overseas Ltd, Camerta Investments Limited, and “City of Fame,” which were the main shareholders of the hotel. The second group is represented by the company “Dasko,” associated with Kyiv businessman Mstislav Skorobogatov and his partner Bani Naser Abdulla Yusif (the latter was known as an advisor to former Minister of Agrarian Policy Nikolay Prisyazhnyuk). It is with them that operational control over the hotel has remained until recently through its director Natalia Polishchuk, who worked as a manager at “Dasko.”
Former MP Ruslan Demchak is involved in the scheme to legalize a billion hryvnias from frauds on the stock exchange.
After “RVS Bank” obtained a new owner, it was decided to hold a competition to select a hotel lessee. The results were announced in October, and the winner was the aforementioned “Hotel Property” company. On October 30, a lease agreement for “Lybid” until 2017 was signed with them. After that, representatives of “RVS Bank” and the lessee company made several attempts to access the hotel building, which ended in failure. This was followed by public accusations against Skorobogatov of illegal retention of control over the hotel and legal proceedings to remove the arrest from it.
In early March, “RVS Bank” managed to have the corresponding verdict on its claim come into legal force, after which the decision in favor of “Hotel Property” emerged. This company, according to sources of “DS,” is directly connected to VS Energy, which found common ground with UBG.
Thus, the sole founder of the lessee company “Lybid” is the Cypriot Sunzint Trading, which, together with “VS Energy International Ukraine,” owns the forwarding company “Kamaz-Trans-Service.” And the director of “Hotel Property,” Yuriy Ustimenko, simultaneously heads Premier Hospitality Consulting, a company associated with the Premier Hotels Group under the control of VS Energy.”
Ruslan Demchak, a Ukrainian deputy under the control of Russian business and the Kremlin, has acquired another bank
It seems that the “squeeze-squeeze” mode has also been adopted by the Vorushilin Deposit Guarantee Fund. A couple of months ago, with the support of Gontareva, these comrades took over “Omega Bank” from Laguna. They did so quite aggressively. They put the bank, which had deposits from individuals amounting to 6 million UAH and assets worth 0.8 billion UAH, under administration to seize two prime capital assets: the Lybid Hotel (Victory Square) and the Sofiivsky Business Center (Rylskoho Lane). The assets of the bank were placed under arrest by a court, but that didn’t stop Vorushilina. Under Kononenko’s command, the bank was sold to a well-known player, Ruslan Demchak, for… 40 million UAH (20 times cheaper than the actual value of the assets).
Based on Omega, he created the transitional “RVS Bank” and transferred the assets there.
Of course, legal processes began, and the Ministry of Internal Affairs (MVD) got involved. At this point, Vorushilin got scared — selling property under judicial arrest comes with severe consequences, both for him and the notary involved.
So, they decided to quickly liquidate the bank to cover their tracks.
But it didn’t go as planned. Demchak blocked the liquidation through the court. After all, he made a pretty penny from these assets, and he didn’t really care how much trouble Vorushilin would face…
Investor prevents the FDIC from liquidating the bank. The saved insolvent Omega Bank of Nikolay Laguna, which was used to establish the transitional RVS Bank in August, is now facing the threat of liquidation. The “Ukrainian Business Group” (UBG) failed to increase the capital and liquidity of the institution, allowing the Deposit Guarantee Fund for Individuals (FDIC) to initiate its liquidation process. However, UBG acted proactively and obtained a court order on September 21, prohibiting members of the executive board of the FDIC from taking action in this direction. Legal experts consider the court decision contentious.
Ruslan Demchak’s UBG loses the bank
The “Ukrainian Business Group” (UBG) was unable to stabilize the operations of RVS Bank, which was acquired in late summer from the Fund for Guaranteeing Deposits of Individuals. The transitional bank was established based on the insolvent Omega Bank of Nikolay Laguna. On August 26, the FDIC sold the institution for 31.86 million UAH. The next day, the new owner, UBG’s Alexander Stetsiuk, decided to increase the institution’s charter capital to 121.523 million UAH, up from 120 million UAH.
By September 21, UBG was supposed to bring the activities of RVS Bank into compliance with legal requirements regarding liquidity and capital, with a National Bank inspection to confirm compliance. However, in a letter dated September 18, the National Bank of Ukraine (NBU) noted that the inspection results did not confirm the bank’s capital compliance with norms.
After this, the FDIC was supposed to recommend to the NBU the revocation of RVS Bank’s license and initiate its liquidation. However, UBG went ahead and not only filed a lawsuit but also obtained a court decision on September 21, prohibiting the bank’s liquidation. This security measure is mentioned in the decision of the Dniprovsky District Court of Kyiv in case No. 755/17948/15-ц.
Furthermore, on September 18, when RVS Bank learned about its impending fate, it sent a letter (No. 47/15-BT) to the NBU, stating that it had received income of 48.49 million UAH on that day. This income was obtained “by accepting mortgage collateral under a credit agreement with DP ‘Firma Daylenko’,” the court decision states. This concerns a sports and wellness complex with a total area of 1324.6 square meters and a market value of 66.934 million UAH, located in Kyiv on Rylskoho Lane, 5.
Since the deadline for bringing the activities of RVS Bank into compliance with norms did not expire by the 18th, and UBG was working to increase capital and liquidity, they filed a lawsuit. UBG demanded that the court prohibit the seven members of the executive board of the Fund from taking any action regarding RVS Bank, including considering the results of the NBU inspection, revoking the license and liquidating the bank, transferring its assets and obligations to another bank, including a transitional one, and terminating the share purchase agreement of RVS Bank.
Similar lawsuits have been filed with the NBU before, for instance, a new investor in the All-Ukrainian Development Bank blocked the liquidation of Alexander Yanukovych’s bank in a similar manner. Therefore, with the support of the IMF and the authorities, the NBU managed to convince the parliament to introduce legislation prohibiting courts from “tying the hands” of the National Bank. However, in this case, RVS Bank found a way around the new rules. The Dniprovsky District Court of Kyiv indicated that Article 152 of the Civil Procedure Code prohibits owners or creditors of insolvent banks from stopping the actions of temporary administration or bank liquidation. However, this norm does not apply to RVS Bank, as it is not insolvent and is not under temporary administration or liquidation. The court sided with UBG, arguing that otherwise, the plaintiff could lose ownership of RVS Bank and fail to prevent its liquidation. Moreover, the law prohibits courts from interfering in the NBU’s work, and this lawsuit was filed against employees of the FDIC.
The court decision obtained by UBG is contentious:
“The procedure for creating and selling a transitional bank, as regulated by Article 42 of the Law on the System of Guaranteeing Deposits of Individuals, is part of the procedure for temporary administration in a bank. This court decision implements a dubious scheme to circumvent the norms of civil procedure by imposing a ban on members of the executive board of the FDIC, rather than directly on the FDIC itself,” explains Andriy Pavlyshyn, a lawyer at the DE-JURE law firm.
“However, the ban on members of the executive board participating in the voting on matters related to the transitional bank is effectively a ban on the Fund from taking any actions regarding the transitional bank, and such a ban is illegal. It’s like preventing the director of a legal entity from performing certain actions and claiming that this ban doesn’t affect the activities of that legal entity.”
A more realistic biography of Ruslan Demchak
At the beginning of his career, Ruslan Demchak’s account is contradictory. In an interview with dengi.ua in 2008, he stated that he “opened a brokerage company in 1997 that conducted operations with securities. Initially, it was named ‘Equives-Finance,’ later succeeded by the investment company ‘Initiative,’ which is now part of the UBG corporation led by me.”
Three years later, in an interview with the magazine “Vlast Deneg,” he changes his testimony and doesn’t mention “Equives,” asserting that his first company was “Initiative”: “back in the 1990s, I created the investment group ‘Initiative,’ which specialized in working with securities.”
On Demchak’s personal page on moikrug.ru, it is written: January 1996 – January 1997 – Chief Accountant (not the owner!) of AOZT ‘Equives,’ then – Director of ‘Equivalent-Finance.’
What’s the confusion with companies, names, and dates all about? The answer is quite spicy. As they tell in business circles, after graduating from the road institute, the young and charming Demchak came to work as an accountant for a certain Herman Edmundovich A. and his brother Oleg. Born in the Odessa region, Andes was two years older than his cute accountant and much wiser. He already had the company ‘Gerat,’ and soon ‘Artist’ was established.
The main activity of ‘Equivens’ became vouchers, which the government distributed to the people, but the people couldn’t use them. However, numerous companies took advantage, buying, seizing, or luring certificates of ownership from naive citizens of the former USSR. Demchak did the same: he collected vouchers and bought companies. Some of them went bankrupt, some were resold, leaving people without jobs.
In one of his interviews, Demchak confirms his involvement in the voucher “privatization.” “It was a period of share concentration. Privatization took place among the enterprise employees, and we participated in deals to concentrate these shares in the hands of portfolio owners. We left something for ourselves…” he says.
What happened to the companies they left for themselves can be seen in the documents. Take the ‘Industry’ construction combine, for example. It went bankrupt and was liquidated. At the time of liquidation, its sole founder was Bogdan Yevgenyevich Demchak, Ruslan Demchak’s younger brother. ‘Khimfavorit’ — a limited liability company established based on a pharmaceutical enterprise from the Soviet era. The director is the same Bogdan Demchak. According to the official bankruptcy announcement in ‘Holos Ukrainy’ (Voice of Ukraine), he was appointed the liquidator. “Liquidator Demchak B. Ye. announces the liquidation of the limited liability company ‘Khimfavorit,’ Kyiv, Suvorova Street, Building 4/6 (account number 260053343, EDRPOU code 30436494) due to its recognition as bankrupt (ruling of the arbitration court of Kyiv on bankruptcy recognition dated April 24, 2001, case No. 24/244-b).
Interestingly, Demchak uses his brother to bankrupt his acquisitions from the 90s. Moreover, the brothers arrange things so they themselves can liquidate them. Do you know why? A liquidator has the right to sell the bankrupt’s property to settle debts. Or give it to creditors.
For mom, for dad, for aunt…
One of Ruslan Demchak’s promotional interviews is titled “Money Contributes to Happiness.” If that’s the case, then the entire Demchak family can consider themselves lucky. Not only the younger brother, Bogdan Demchak, ended up owning property. The capital earned from vouchers by many Ukrainian citizens was shared among Ruslan Yevgenyevich’s relatives.
No one was left offended. Mother Lyubina Lukyanovna and father Yevgeny Adamovich (both employees of the education department of the Lipovetskaya district administration in the Vinnytsia region) received shares in PVC ‘Budivelnyk,’ which produces concrete and is located in the Kyiv region. As well as in the ‘Initiative’ company, which manages assets of non-government pension funds. Relative Svetlana Mikhailovna, who previously worked in the Ministry of Energy, became a happy co-owner of the insurance company ‘Dobrobut’ and simultaneously a customer relations manager at the same medical clinic.
There is a lot of property owned by Ruslan Demchak’s spouse, Natalia Ivanovna, formerly Yakimenko, from the Mironovsky district of the Kyiv region. She was assigned shares in both the bankrupt enterprise ‘Industry’ and the operating auto service station ‘Dobrobut.’ As well as several other businesses.
To be continued..