The Megabank case: How €30 million of a European loan ended up in the hands of entities affiliated with the Subbotin family

Did funds intended to support Ukrainian small businesses end up in the pockets of the banker’s family? Law enforcement officials are investigating the multimillion-dollar case of Megabank, assuming that the money received from the Ministry of Finance and the European Investment Bank could have been used to settle the debts of companies affiliated with Viktor Subbotin’s family and his wife.

The pre-trial investigation in the case of Megabank JSC concerns the possible embezzlement of about EUR 30 million that the bank received as part of an international program to support small and medium-sized businesses. The investigation focuses on the bank’s co-owner, Viktor Subbotin, his family, and companies controlled by them.

International Funds Instead of SMEs

The SME Main Loan Program was launched in Ukraine in 2017 with the support of the European Investment Bank. Funding was provided through the Ministry of Finance and Ukreximbank to commercial banks participating in the program.

JSC Megabank became one of the recipients of international financing, attracting EUR 30 million between December 2017 and November 2021. However, instead of targeted lending to entrepreneurs, a significant portion of the funds, according to law enforcement, was used to finance the bank’s affiliated entities.

The key role of ZKM LLC

The largest sum of money – 10 million euros – was received by ‘Non-ferrous metals plant’ LLC (Ukr. ‘Zavod Kolyorovykh Metalsiv’ – ZKM), the company indirectly linked to Subbotin. It is noteworthy that the company used part of these funds to repay its previous debts to the same bank. The company placed the remaining money on deposit, the rights to which it pledged as collateral.

Further investigation revealed that ZKM had spent the previous loan tranches on purchasing real estate from the bank and securities from ‘ZNKIF Savings’, an entity also controlled by Subbotin. Financial transactions were conducted through ‘OPION-TRADE’ LLC, where the banker’s wife, Olena Subbotina, is a director and owner of a significant share.

Family network of companies

‘OPTION-TRADE’ LLC is a Kharkiv-based company with an authorized capital of over UAH 51 million, officially engaged in printing activities, but has a wide range of services, including financial transactions and real estate leasing. The company’s registered office is a non-residential building of almost 5,000 square meters, which it owns, as well as a land plot leased since 2012.

Investigators found that the firm probably functioned as a key element of a money laundering scheme within a “conversion center” with an interregional network.

Olena Subotina heads several companies, including ‘TORI 2014’ LLC, ‘TUDU CORPORATE’ LLC, ‘M-Invest’ PJSC, and others, which share a common legal address with Subotina’s investment fund. In 2023, these premises were searched to seize financial documents.

Chronology of the case and the MEGABANKRUPTCY

Criminal proceedings No. 42019221430000469 were opened in 2019, but the active phase of the investigation began only after the case was transferred to the State Bureau of Investigation in early 2022. Investigators found systemic violations in the bank’s credit policy, including lending to related parties and misuse of funds.

In February 2022, the National Bank of Ukraine recognized Megabank as problematic, citing systemic lending to related parties as one of the main reasons. The bank’s management did not take measures to stabilize the situation, which led to the introduction of a temporary administration.

After losing control of the bank, related entities began to “retreat” – in particular, the Nonferrous Metal Plant entered bankruptcy proceedings in December 2022. There is a hypothesis that the bankruptcy is artificial and may be part of a general scheme to divert property.

What is known about the defendants

Viktor Subbotin is a public figure with many years of experience in business and public administration. He is a former CEO of Turboatom (now ‘Ukrainian Energy Machines’ JSC), a deputy of the Kharkiv Regional Council from the Servant of the People (Ukr. Sluga Narodu) party, a state award winner, and an honorary citizen of Kharkiv and the region. His business portfolio includes membership in the Supervisory Board of Megabank and dozens of companies as a founder or beneficiary.

His wife, Olena Subotina, runs at least seven companies and, according to the investigation, is a key person in the business operations of withdrawing funds. Together with her brother, Oleksiy Yatsenko, former chairman of the board of Megabank, the investigation believes they may have been co-organizers of one of the largest schemes to embezzle international funds.

As of today, neither Subbotin nor his associates have been officially notified of suspicion in the criminal proceedings. However, the intensification of the investigation and the disclosure of details of the case indicate a gradual development of the process.

The investigation is currently ongoing, and its results may be critical to restoring European partners’ confidence in the Ukrainian banking system.