Russian oligarch and one of the sponsors of Putin’s terrorist regime, Arkady Rotenberg, de facto continues to control one of the country’s largest shopping centers, Ocean Plaza.
If the auction for the privatization of Ocean Plaza is announced in the coming days, the new owner of the shopping center will owe Rotenberg UAH 8 billion, or $200 million, and he is unlikely to be able to avoid this debt.
The situation can be corrected by the State Property Fund and the Ministry of Justice, but officials are in no hurry to intervene.
Where did Ocean Plaza's debt come from if Rotenberg owned the shopping center all the time?
Last year, the Supreme Anti-Corruption Court made, without exaggeration, a historic decision and took the first step towards the nationalization of one of the largest and, probably, the most expensive shopping center in the country, Ocean Plaza.
During the trial, the court revealed previously unknown details that shed light on how Russian oligarch Arkady Rotenberg acquired ownership and management of the shopping center.
The history of Ocean Plaza begins in 2009. It was then that two Ukrainian developers built a shopping center, and it was purchased by Putin’s oligarch Arkady Rotenberg.
The formal owner of Ocean Plaza was the Ukrainian LLC IS Lybid, which was 100% owned by Avangard-Vilarti LLC, which in turn was 100% owned by the Cypriot offshore Ethoder Investments Limited. And further along the chain to Rotenberg.
IS Lybid LLC received money for the acquisition of Ocean Plaza from its parent Ethoder Investments Limited as a loan. The loan amount is $150 million, the interest rate is an absolutely non-market extortionate 20% per annum in dollars. No businessman in his right mind would agree to such conditions.
Rotenberg's trap. Together with Ocean Plaza, the state “nationalized” a seven billion loan
Only the point of the loan was not in lending, but in tax evasion. Under the pretext of paying interest on a loan, Ocean Plaza's profits were transferred from Ukraine to Cyprus.
The VAKS decision established that in the period from 2013 to 2020, IS Lybid LLC paid interest on this loan for about $249.8 million. According to financial monitoring estimates, as a result of this scheme, more than $61 million in taxes did not reach the state.
All this time, only interest on the loan was repaid; the main part of the debt did not change. This was done in order to transfer all profits from the activities of Ocean Plaza to Cyprus.
In 2014, the war began - the east of Ukraine began to burn, Russia captured Crimea. Rotenberg, against whom sanctions began to be imposed, decided to hedge his bets. On March 28, 2014, the “loan” was secured with a mortgage; to put it simply, the Ocean Plaza building was pledged for $150 million.
A common scheme that is often used to protect against raiding: property is pledged through a “fake” loan, and thus it becomes much more difficult or even impossible for raiders to take it away. Only in our case the scheme was used to protect against nationalization.
Later, as an additional precaution, a Ukrainian shareholder appeared in Ocean Plaza with a share of 33.35%. In my opinion, it’s just as fake as the loan, and this was done only to protect Rotenberg from sanctions, but this topic deserves another column, so let’s not get distracted.
On May 10, 2022, by a resolution of the investigative judge of the Pechersky District Court of the city of Kyiv in case No. 757/10779/22-k, 100% of the corporate rights of IS Lybid LLC and Avangard-Vilarti LLC were seized.
And already on September 13, 2022, the same Pechersk court lifted the arrest of 33.35% of IS Lybid LLC and 33.35% of Avangard-Vilarti LLC. From this resolution it follows that the basis for this was the failure of the prosecutor to provide evidence that would indicate any logical and objective grounds for the arrest. Due to a “strange coincidence,” the prosecutor did not appear at the said court hearing.
On March 20, 2023, by decision of VAKS, 100% of Avangard-Vilarti LLC and 65.65% of IS Lybid LLC, which is the owner of the Ocean Plaza shopping center, were nationalized.
Another 33.35%, due to a number of frauds with the reduction of authorized capital and thanks to the lifting of the arrest by the Pechersk court, at the time the decision on nationalization was made, already belonged to the Ukrainian shareholder, which saved 33.35% of the shopping center from nationalization.
At the beginning of the summer of 2024, we had this picture. The state nationalized Ukrainian LLCs controlled by Rotenberg that own the shopping center; has imposed sanctions on the Cypriot legal entity that issued the “loan” and is preparing an auction for the privatization of 66.65% of IP Lybid LLC, which owns 130 thousand square meters of the Ocean Plaza shopping center.
An important detail is worth mentioning here. In the very court decision that I mention at the beginning of the article, we are talking about a letter from the Foreign Intelligence Service of Ukraine. It emphasizes that the Ocean Plaza shopping center belongs to the Ukrainian LLC IS Lybid only formally, but in fact it is controlled by the Rotenberg company that provided the loan.
Thus, the nationalization of corporate rights of IS Lybid LLC made the state of Ukraine a debtor to Rotenberg in the amount of more than $200 million ($150 million loan and more than $50 million interest on this loan).
Loan to Russian oligarch still hanging on Ocean Plaza
With accrued interest, the debts of IS Lybid LLC at the end of 2023 amount to UAH 8.1 billion, or a little more than $200 million. This is more than the cost of the entire shopping center.
The actual price of a debt-free shopping center today is no more than $150 million. Let’s assume that tomorrow Ocean Plaza gets a new owner and he will pay the starting $40 million at auction for 66.65%. In addition to the starting price, he will be forced to pay Rotenberg another $200 million.
Thus, having paid $240 million, the new owner will receive 66.65% of $150 million. “Absurd,” you say. But representatives of the State Property Fund do not think so and live in a parallel reality.
Information can be easily checked in YouControl. That is, instead of the real price, the shopping center will cost twice or three times more. Section – obligations of LLC “Investment Union “Lybid”” for 2023.
It probably just occurred to you that you don’t have to pay the sanctioned Russian oligarch, just let him get away with it. Moreover, the legal entity to which the money was withdrawn is under Ukrainian sanctions.
Only there are no fools on the other side either. And the loan, in our opinion, can be reissued to another legal entity, perhaps even a Ukrainian one with a founder in the person of some Indian family from a London suburb. Immediately after privatization, they will come to the Ukrainian court with a claim to collect the debt.
Ukrainian, British and any court will most likely satisfy this claim. The loan and mortgage were issued in accordance with all legal provisions, and the new owner will either have to give up the shopping center or sponsor the Russian military-industrial complex for $200 million. The enemy will be delighted with this turn of events.
What does the state need to do so that Rotenberg really gets rid of Ocean Plaza as an asset and is not able to demand $200 million from the state of Ukraine or the new owner through the court? Let's go read the law and act exactly as it is written there. Namely:
Debts of state enterprises, institutions and organizations of Ukraine and/or business companies, in the authorized capital of which more than 50 percent of the shares (stakes) belong to the state, the rights of claim of which were forcibly withdrawn in accordance with this Law as objects of property rights of the Russian Federation and its residents, are considered extinguished from the date of entry into force of the law of Ukraine, which approved the decree of the President of Ukraine on the implementation of the decision of the National Security and Defense Council of Ukraine on the forced seizure of the relevant objects of property rights of the Russian Federation.
To start the process, the Ministry of Justice and the State Property Fund must immediately file a claim for the seizure of the state's right to claim a loan against a company that is 50% owned by the state (IS Lybid LLC).
Translating from legal language into human language, with the help of a court decision to multiply the debt of a state enterprise to a hostile oligarch by zero.
All! After this, the debt will be written off, a clean legal entity without debts will be put up for auction, and after that it will be possible to talk about fair market conditions for the privatization auction.
Why don’t the Ministry of Justice and the State Property Fund take the actions provided for by law to rid the state of Ukraine of a $200 million debt? Is it incompetence and slow bureaucratic processes or playing on the side of a hostile oligarch? I think we will get an answer to this question in the near future.
Ocean Plaza is still run by a team hired by Rotenberg
Thanks to the Ocean Plaza management team, Putin's close friend Rotenberg withdrew hundreds of millions of dollars from Ukraine by circumventing taxes. With money from these accounts, Arkady Rotenberg’s son Igor acquired 48% of the shares of the Tula Cartridge Plant in 2017, and 50% of the Ulyanovsk Cartridge Plant in 2019. Later, these enterprises received government contracts for the production of weapons. With which the enemy army killed Ukrainians.
Only accomplices of the enemy, instead of becoming defendants in criminal cases, continue to manage the most famous shopping center in the country. Apparently, in order to avoid responsibility, a certain Anatoly Sergeevich Nomerovsky was appointed as the formal director of IS Lybid LLC before nationalization.
This man is unknown to anyone and has not led anything. A figurehead, or “Zits-chairman Pound,” as the classics wrote. But the State Property Fund is happy with this. They say reports are submitted on time.
Even more strange is the reaction of the State Property Fund, which owns a majority stake in Ocean Plaza. I will quote the former acting the head of the State Property Fund, Alexander Fedorishin, in an interview with Forbes, where he directly says that no one is going to change the leadership: “But I ask my colleagues what is more important for you: getting involved in this long-term management, from which we will only be given stones, or so that this asset is demonstrably and successfully sold. We have focused on privatization.”
Recently, in another interview with Forbes, the head of the fund, Vitaly Koval, was still unable to answer three (!!!) questions from the journalist about how he was going to resolve the issue with multimillion-dollar obligations: “I will answer your question with a question for you. Do you, as a citizen of Ukraine, think what is best to do with Ocean Plaza: faster, but this year, or longer and, perhaps, with a larger amount, but over a long period?” I simply have no comments.
Another representative of the already state-owned LLC IS Lybid is Vallabh Andrea Rishaal, who, according to the HACC decision, is a Swiss lawyer for the Rotenberg family. State Property Fund, do you even exist?
All this allows us to state that in the third year of a full-scale war, the Rotenberg family retains control over Ocean Plaza and its financial flows!
The State Property Fund “painted” the price of Ocean Plaza from the ceiling
According to the law adopted at the beginning of 2022, the starting value of assets for privatization is determined as book value. And this could theoretically be acceptable for the privatization of just real estate. Only now the starting price of IS Lybid LLC was calculated at the level of a school mathematics lesson. The company's assets were multiplied by 0.65 (the state's share) and received a starting price of UAH 1.6 billion.
But in our case, the company also has a liability, and this is the same debt of 8 billion UAH. If you take it into account, the cost will turn out to be a minus sign. And if you take an inventory, the amount will be third. But the inventory is not carried out by the same State Property Fund. And it is the same aforementioned “effective management” that blocks it.
All this can be called juggling with numbers, substitution of concepts, or whatever you like, but the starting price of Ocean Plaza is absolutely not related to the real cost of IS Lybid LLC.
Why is this happening? There are several ideas. Passivity of officials? Maybe. This is not the first such story for the State Property Fund. Ocean Plaza is one of many objects that have become state property, after which the state does not even try to figure out what it owns, how much it all costs and how to effectively manage it.
Resistance from the management of the shopping center, which acts in the interests of Rotenberg? It's also possible. Unexpected intractability of a minority owner? And again it is possible. I will try to understand the answers to these questions in the following publications.
Three theses instead of results
Rotenberg retains control over the shopping center and its cash flows through the credit and management of IS Lybid LLC, which worked for the Rotenberg family for years and took hundreds of millions of dollars offshore.
- The Ministry of Justice and the State Property Fund do not take actions provided for by law and do not collect claims on a loan in favor of the state.
- With a debt of $200 million, 66.65% of IS Lybid LLC, as the owner of the Ocean Plaza shopping center, is worth nothing.
- Under such conditions, the only buyer of the state share can only be Rotenberg or his proxies!
