The Housing Capital case: where did the billions go?

Kyivmiskbud, the capital's largest developer, is on the verge of complete bankruptcy. All of its construction sites have been standing for several years, UNN reports.

Investors, together with the company's new management, are stubbornly looking for opportunities to resume construction. There are several promising ideas, but all of them, in the opinion of the authorities, as the owner of the utility company, are not workable.

Investors, in particular those who invested in Ukrbud's residential complexes, are demanding to find their funds, which were kept by the manager and guarantor of their construction - LLC Financial Company "Zhytlo-Capital". We are now talking about at least UAH 3.7 billion, which mysteriously "disappeared" from this reserve of the Construction Financing Fund (CFF).

The National Securities and Stock Market Commission (NSSMC) has also been demanding for more than a year that this company "find" investors' money and keep it in accordance with the law - on the accounts of financial institutions.

The regulator has repeatedly fined Zhytlo-Capital for systematic gross violations, and last fall suspended the offending company's license to carry out its core business as a fund manager. The SBI is also investigating the fraud of the company's owner, Dmytro Kravchenko.

The situation around Kyivmiskbud's long-term construction projects and the disappearance of investors' money is escalating. People expect the authorities and law enforcement agencies to intervene.

Due to the illegal withdrawal of money to the accounts of a "friendly" business entity, namely the scandalous Kasa Narodnoi Dopomohy LLC, the state, represented by the financial regulator, several times obliged FC Zhytlo-Capital to place the construction reserve fund of more than UAH 3.7 billion on bank deposits. This is required by the legislation of Ukraine.

Zhytlo-Capital collected funds from investors for the construction of apartments in Ukrbud's residential complexes and acted as a guarantor of their construction. Investors had contractual relations with this company, which guaranteed transparency of the process, reliability in spending money, compliance with the law and timely completion of construction projects. However, everyone has heard stories about the misfortunes of people who invested in Zhytlo-Capital after the crisis with Ukrbud.

Is it possible to return the money now and use it for construction? In previous years, law enforcement officers have repeatedly investigated the facts of embezzlement of investor funds through Zhytlo-Capital and its related entities, but there has been no court verdict in this regard.

There is no punishment for those guilty of fraud and outright theft. Now, they are persuading and prolonging sanctions in the form of meager fines and restrictions on the licensing of the management company. It all started last year with NSSMC Order #49-DUM and NSSMC Resolution #46-DUM, followed by sanctions in the form of license suspension and prolongation. The new deadline for remedying the violations expires in June this year.

But it is already obvious that no one is going to voluntarily return investors' money, and the legal requirement that "companies engaged in professional property management activities to finance construction projects or real estate transactions must keep the funds of the operational reserve formed at the expense of funds raised for management exclusively in bank accounts" will not be complied with.

Obviously, the trustees' money was stolen, and persuasion, rulings and fines of several thousand hryvnias will not help the situation.

The National Commission found out the circumstances of how Zhytlo-Capital started placing investors' funds on the accounts of the aforementioned non-bank "People's Aid Fund".

These companies are directly related, as the former is the founder of the latter - and in certain periods they had the same employees, both were always under the direct influence of the same beneficiaries and managers, etc.  

There are hundreds of other, lesser violations and numerous investor complaints about violations of construction deadlines, lack of permits, and financial fraud against the backdrop of billions being stolen. 

This was the case for almost all the complexes and facilities to which the above-mentioned companies were related. Dmytro Kravchenko was always at the head of this investment octopus.

Background of Kravchenko's companies

According to the Youcontrol analytical system, FC Zhytlo-Capital LLC was registered in September 2007. The founder is KTK-Group LLC.

The aforementioned Dmytro Kravchenko was the director of FC Zhytlo-Capital in 2007-2012. In 2016, he officially acted as the ultimate beneficiary of this company, and now, according to the capital's developers, he is the owner of Zhytlo-Capital. Narodna Dopomoga Kasa LLC was registered in January 2009, with the aforementioned FC Zhytlo-Kapital LLC (99% share in the authorized capital) and KTK-Group LLC (1%) as its founders. In its turn, the founders of KTK-Group LLC are currently Narodna Dopomoga Kasa LLC (52.6%) and AMC Ukrainian Capital LLC (47.3%).

In addition to the obvious business relations, there are many "personal" ties between FC Zhyttalo-Capital LLC and Narodna Dopomoga Kasa LLC. They have common directors, accountants, etc. It went so far that, as Ukrayinska Pravda reported in 2020, the People's Aid Fund was even registered in the house of Yakusevych, a Ukrbud fraudster and friend of Kravchenko. Kravchenko and part of his team are "grateful" students of the crook Laguna's Delta Bank. They were brought to Ukrbud by Yakusevych, the schemer of the Mykytas empire, and coordinated by Ukrbud CEO Oleh Maiboroda. Insiders estimate that the system has attracted up to 40 billion in investments over the entire period of cooperation. And according to many experts, their main task was to transfer the investors' money from one account to another, as well as to work to "calm people down." Marketing of construction projects and similar issues were no longer in their "parish".

The catastrophe of 2019

In 2019, work on Ukrbud's construction sites stopped. Among the reasons cited were serious reputational losses of the developer due to the NABU case against the company's management, in particular, its CEO Oleh Maiboroda and the owner of one of its structures, Maksym Mykytas, and, as a result, a sharp decline in sales of the developer. The subsequent raider seizure of Ukrbud and the struggle for its assets also had an impact. About 13,000 investors who had invested in the construction of apartments were at risk of being left homeless. It was a catastrophe six times bigger than the previous scandalous Elita Center scam. And the key to the development of the negative scenario was the lack of funds paid for their future apartments by investors of Zhytlo-Capital as the manager of construction funds that were not used for their intended purpose. During the period of corporate disputes around Ukrbud, the money simply "disappeared" from the accounts of the housing company with the eloquently cynical name "People's Assistance Fund.

It is now obvious to many that while public attention was focused on the paralyzed construction sites and the epic battle for Ukrbud's assets, in the quiet of the offices at 2 Protasov Yar, where the headquarters of the financial manager Zhyttlo-Capital was based, lively work was underway to use the funds in areas other than construction. It was during the crisis and the sale of Ukrbud's assets that the main stage of dematerialization of investor billions in the "cash desks" of the fund manager took place. We are talking about more than UAH 3.7 billion of clients of FC Zhytlo-Capital who were careless enough to contact these dealers.

A significant part of the "missing" funds was most likely moved offshore. But some of it left bright "traces" in the wealth of the owner Kravchenko and his entourage. It was during these years that the personal enrichment of investors' money managers took off almost vertically.

There are many examples. It was then that Kravchenko became the owner of the Yarmolynets Cannery in Khmelnytsky region. Personally, for tens of millions of undeclared funds.  

The company underwent an expensive reconstruction, installed an expensive production line imported from Europe for a line of new products, and completely revamped its brands and products, which were launched in retail chains in Ukraine and Europe. And the widely popular fruit drink from Yarmolyntsi, a plant bought with the "missing" money of investors, has become the hallmark of Kravchenko's enterprise.

The crooks did not forget about the capital's real estate. Kravchenko personally bought out a huge office building that housed the manager of investor funds - Zhytlo-Capital itself at Protasiv Yar, 2 and surrounding addresses. The office building itself is 2,377.3 expensive square meters in the central cozy district of Kyiv, which was modestly estimated at almost 80 million hryvnias of unknown origin.  

This was against the backdrop of the then-current disaster with investors in Ukrbud's construction projects. Expensive modern renovations were carried out. The businessman is still the owner of this huge office building and the land plots for it, according to documents worth UAH 5,377,000 and UAH 3,574,000, respectively.

It is from there, from his own complex of objects at a market price, even now totaling more than one hundred million hryvnias, that he still advises investors and Kyivmiskbud where to ask for funds to complete houses for people.

Next, more. Kravchenko has launched his own large-scale construction projects - he builds entire residential complexes. His new residential complex "Sadochok" on the city limits of the capital in Kyiv-Svyatoshynskyi district in the apple orchards of Novosilky village is an example. It started with 9 buildings in the old elite European style with towers, attics and bay windows for 411 apartments. A small town in an elite neighborhood with its own medical centers, supermarkets, kindergarten, etc. Moreover, it has already captured the entire construction business environment here - from the developer represented by the aforementioned KTK-Group LLC, construction contractors to the manager represented by the familiar Zhyttalo-Capital and its sales structures.

This residential complex is one of the many projects that have flourished in the businessman's hands since the disappearance of billions of Ukrbudiv's investors. Moreover, construction on the projects continues even now during the war. The latest report on the progress of construction in the above-mentioned residential complex "Sadochok" is posted on its website on April 22 this year. There were no problems with finances either at the start of construction against the backdrop of the disappearance of money from investors who trusted Zhytlo-Capital or now during the war. Financing of some of their structures by other wealthy people has made a difference.

According to open information in the Opendatabot.ua system, Dmytro Kravchenko is the owner and beneficiary of almost a dozen other businesses  , ranging from construction to tourism. And if we include his family and entourage, we are talking about dozens of businesses with official financial turnover in the tens of millions, which strangely revived and had significant injections during the period of problems with Ukrbud's residential complexes and the disappearance of funds entrusted to Zhytlo-Capital by investors. Strange, isn't it?

Against the backdrop of the Ukrbud "catastrophe" and the disappearance of money, in December 2019, the President of Ukraine entrusted the completion of residential complexes to the Kyiv municipal company Kyivmiskbud, which had shown great interest in this. Obviously, this was not part of the plans of many of those who were rapidly enriching themselves on the ruins of Ukrbud. An accelerated sale of the construction giant's tangible assets has begun. Entire residential complexes, business centers, valuable land, hundreds of finished and unsold apartments, parking lots, thousands of meters of commercial space - all of this was rapidly sold through the back door for a living.

The main schemes in this regard then belonged to the raiders led by the Russian restaurateur Fedotenkov, who skillfully dumped the previous owner, ex-MP Mykytas, on the "terms of reference" he signed and took over its management. He even made Mykytas's godfather, CEO Mayboroda, an accomplice in his criminal dealings. Ukrbud's legacy was then going under the hammer in all directions.

Here again, the "guarantors" of investor funds, the businessmen from Zhytlo-Capital, played an important role..

"Golden" time of the manager

As already mentioned, unlike investors, this period, surprisingly, became "golden" not only for the raiders, but also for the managers of investment funds - the owners of Zhytlo-Capital. In particular, for the main beneficiary, who has always tried to stay in the shadows, financier Dmytro Kravchenko. He always had enough pounds to do the dirty work, and there was always someone "brave" to do it. At the time, Kravchenko held a "golden share" in a major redistribution of Ukrbud's assets. In contacts with the authorities, influencing the investors who were rebelling at the time, negotiating with new developers, dealing with raiders, etc. Signing housing pounds to raiders, paying for the approval of entry to tasty objects of new developers, a charade with documents during the period of intraspecific struggle in the former environment of the odious Mykytas led to an unprecedented season of selling off Ukrbud property in the capital. And almost all of this was done through "coordination" with Kravchenko's structures.

For a few million in compensation, the Vikings from among the Kharkiv developers of the notorious Maslenikov entered some of the properties, and they got the promising Parkova Dolyna residential complex, the expensive Level business center, Zhilyanskaya, and a number of other properties. Local construction giants also got trophies, and hundreds of objects changed owners and developers. Intergal-Bud, by the way, was fortunate enough to enter one of them. The elite residential complex La Mansh and others have found their new guardians-developers from the OPFL's entourage.

The raiders Fedotenkov and Mayboroda, as well as their then protectors from the authorities and crime, get the most goodies for themselves and their organizations. But most of the residential complexes, eighteen of them, and the responsibility for their completion went to the municipal PJSC HC Kyivmiskbud. In the first few years of this large package of housing estates, the company sold more than UAH 4 billion worth of space. The price of expensive square meters was raised several times, the design documentation was changed, and everything was distributed among contractors from the Kyivmiskbud orbit. It is safe to say that the rapid sale of Ukrbud's legacy with the help of Zhytlo-Capital was one of the most striking clandestine events in the capital at the time.

But all of this would not have been possible without the participation of Dmytro Kravchenko, the owner of Zhytlo-Capital. Without him, there would have been no attraction of funds from gullible investors into the orbit of Nikitas' structures, and without his support, Fedotenkov's raider "sale" would not have taken place - and it was he who economically opened the gates to new developers, from Kharkiv Vikings to Kyivmiskbud. His signatures are on all the fundamental documents of that period. He always had the levers to calm or excite the community of investors, who were sent to speak to the OP, the Defense Ministry, KCSA, etc. And then the residents found common ground there on various issues, including their own. Together with Kyivmiskbud, the residents promoted the completion of the complexes that were almost ready at the time of Ukrbud but not commissioned at that time: "Novomostytskyi, Kharkivskyi, Harmonia, Sonyachna Riviera, Pectoral, Shevchenkivskyi, Freedom, and partially Oberih-2, Zlagoda, and Podol Grad. Zhyttalo-Capital has been skillfully managing the dissatisfaction of investors in these residential complexes due to the poor quality of completion and numerous defects. In recent months, according to many insiders, Kravchenko has also taken the new head of Kyivmiskbud, Vasyl Oliynyk, into his "turnover", directing him instead of a thorough audit and search for missing money or search for new investments to reefs of delay and ineffective measures to resolve claims against KCSA.

For example, Kravchenko once pulled off dozens of deals with director Mayboroda, helped Fedotenko's Russian raiders quickly get out of the game, conducted complex negotiations with investors - and always pursued his own interests everywhere. He struck out at Mykytasiuk from the shadows, betrayed some of the deals of his early accomplices Fedotenkov and Maiboroda, and repeatedly framed Kyivmiskbud.

At the beginning of 2022, Zhytlo-Capital completely stopped transferring funds to Kyivmiskbud for the work performed. The money that comes to the businessmen from investors in installments is already being eaten up by Zhytlo itself and spent on Kravchenko's projects. The "honeymoon" is over and the game of survival has begun, with everyone on their own.

Kyivmiskbud repeatedly demanded to continue financing the construction, reported about it, even threatened it, which resulted in real wars between Kyivmiskbud and Kravchenko for investors' money. It was then that it became known about numerous cases of Zhytlo-Capital involving fraud with funds, systematic theft, forgery, etc.

Cases of Zhilstroy-Capital

The construction of almost three dozen residential complexes was announced under the banner of Ukrbud. Almost all residential projects were built by private companies, and the financing of these projects was carried out according to the usual scheme for Ukrainian developers. Construction customers entered into special agreements with the management company, which raised funds from individuals and legal entities and subsequently directed these financial resources to purchase construction materials, pay for work, etc.

The purchase of square meters in Ukrbud's complexes was carried out through Zhytlo-Capital, with purchase and sale agreements concluded with it. In other words, legally, housing and commercial space were sold not through the "state-owned" Ukrbud or the "private" Ukrbud, but through a third legal entity.

The money for the construction periodically "disappeared" from the manager even before the 2019 crisis. For example, in November 2015, investigators of the State Fiscal Service of Ukraine opened criminal proceedings №32015000000000231 on the facts of possible embezzlement of UAH 541 million investor's funds in 2012-2014, which they had deposited in the CFF. Among those who could have been involved in such crimes, the fiscal authorities named officials of the aforementioned Zhytlo-Capital Financial Company LLC and Narodna Dopomoga Kasa LLC. And when it became known that Ukrbud could not continue construction because of the raiding, the State Bureau of Investigation began to investigate the disappearance of the money.

At that time, Maksym Mykytas accused his godfather, Oleh Maiboroda, director of Ukrbud Development, of "squeezing" the company together with the raiders. In particular, they stated their intention to complete Ukrbud's apartments and their readiness to cooperate with Kyivmiskbud in this direction.

At that time, the State Bureau of Investigation opened criminal proceedings No. 62019100000001099 on the fact that during 2016-2019, more than UAH 180 million was withdrawn from FC Zhytlo-Capital LLC under questionable circumstances, which was one of the reasons for the freezing of construction work.

According to law enforcement, dubious "service agreements" were concluded to steal funds, and the recipients of the money were individuals. Back then, SBI investigators noticed that the rules of the FSE, which were posted on the website of Zhytlo-Capital FC LLC, contradicted the Law of Ukraine "On Financial and Credit Mechanisms and Property Management in Housing Construction and Real Estate Operations." The company allegedly interpreted the law in such a way that it could freely dispose of the funds of the managers at its own discretion. Unfortunately, as of today, these cases have not been brought to a conclusion by law enforcement - none of the alleged perpetrators has been convicted.

Some of the cases Kravchenko has failed to "hush up" to this day. In particular, one of the latest in the State Bureau of Investigation (SBI) of November 19, 2021 under №42021000000002392 in the URPI, which eloquently testifies to the schemes and methods of Kravchenko's Zhytlo-Capital.

Kravchenko cases

Here is just one example, just one of dozens of episodes. For example, the SBI initiated the case after studying the facts presented by Kyivmiskbud in a report to the Prosecutor General's Office of Ukraine. The focus is on a daring fraud to take over property in the residential complex "Charivne Misto" for almost UAH 283 million! It involved forging documents, using investors' money, and directly involving Dmytro Kravchenko and his wife Natalia Popovych. We quote from the case file:

"During the pre-trial investigation, it was established that on September 04, 2020, 28 UNR (the construction customer), Fortabud LLC (the developer of the Charivne Misto residential complex at the time of Ukrbud) and PrJSC HC Kyivmiskbud (a third party that should complete the facility) entered into a trilateral supplemental agreement, under which PrJSC HC Kyivmiskbud assumed the rights and obligations of Fortabud LLC. Subsequently, on 12.10.2020, 28 UNR, Fortabud LLC and PrJSC HC Kyivmiskbud entered into an additional agreement under which the parties distributed the shares that they would receive in the property after the commissioning of the construction object, namely Fortabud LLC receives the ownership of residential and non-residential premises in respect of which the CFF, as of 04.09.2020, concluded agreements for participation in the CFF with the principals.

Instead, on 09.02.2021, Fortabud LLC appealed to FC Zhytlo-Capital LLC, stating that in 2018, Fortabud LLC entered into contracts for the sale and purchase of property rights to non-residential premises and parking spaces in the X construction phase, indicating their list, a complex of residential buildings and social and household facilities at 18-26 Boryspilska Street in the Darnytskyi district of Kyiv. As a result of the termination of the contracts of sale and purchase of property rights on February 4, 2021, Fortabud LLC regained property rights to them, which are not included in the areas owned by 28 UNR as the construction customer, and are not included in the areas owned by PrJSC HC Kyivmiskbud. Subsequently, on 09.02.2021, Fortabud LLC and FC Zhytlo-Capital LLC signed the "Additional List of Investment Objects (Public Service Center)" and the "Additional List of Investment Objects (Semi-Buried Parking Lot)", according to which Fortabud LLC transferred and FC Zhytlo-Capital LLC accepted the list of investment objects and property rights to them for their further sale.

By a letter dated 08.11.2021, FC Zhytlo-Capital LLC informed PrJSC HC Kyivmiskbud of the assignment of investment objects (non-residential premises and parking spaces in the X and XI construction phases of the Public Service Center and Semi-Buried Parking Lot) to principals. That is, they were actually sold to K.S. Yakovytska, A.V. Kucheryava and N.Y. Popovych (wife of D.V. Kravchenko). Based on the concluded agreements, the accounts of FC Zhytlo-Capital LLC received funds from Ukrbudperekaz LLC for the assignment of the specified investment objects in the interests of the specified individuals for the period from 02/15/2021 to 03/01/2021 in the amount of UAH 282,575,238. Transfers of funds for investment objects in the interests of A.V. Kucheryava, K.S. Yakovitska and N.Y. Popovych were made in cyclical transactions - in the amounts of UAH 4 and 12 million, respectively, according to the following scheme: FC Zhyttalo-Capital LLC transfers funds to the accounts of Narodna Dopomoga Kasa LLC with the purpose of payment "Temporary placement of free funds", then Narodna Dopomoga Kasa LLC transfers funds to the accounts of Ukrbudperekaz LLC with the purpose of payment "Transfer of funds under the loan agreement", and Ukrbudperekaz LLC transfers the funds back to the accounts of FC Zhytlo-Capital LLC with the purpose of payment "for 4 investment objects in the interests of Kucheryava A. В., K.S. Yakovytska and N.Y. Popovych".

In this way, dozens of cyclical transactions were conducted in the amounts of UAH 4 and 12 million. During the pre-trial investigation, sufficient evidence was collected to serve a notice of suspicion: Kravchenko D.V. of committing a criminal offense under Part 3 of Article 27, Part 5 of Article 191 and Part 2 of Article 361-2 of the Criminal Code of Ukraine. This is the misappropriation, embezzlement or seizure of another's property by abuse of office by an official, committed by prior conspiracy by a group of persons, if committed in a particularly large scale.

The scheme is as simple and reliable as a Kalashnikov assault rifle. It is said that the management of Kyivmiskbud was "dumbfounded" by such impudence and scale, and officially reported these crimes to the Prosecutor General's Office. The Kravchenko family and co. cyclically transferred investors' money as their own, passed it through a series of companies with a change of purpose of payments, and "became" the owners of property worth more than UAH 282.5 million through Kravchenko's wife Natalia Popovych and close associates. And Kyivmiskbud was supposed to finish the construction for the lucky ones! Kyivmiskbud could no longer tolerate this and went to law enforcement. And this is just one classic scheme out of many for hundreds of millions of hryvnias, which Kravchenko's "Zhytlo-Capital" dealers periodically used.

What's next?

It is not surprising that as a result of such numerous criminal schemes, Kyivmiskbud did not have enough funds for completion. Thus, at the beginning of 2023, the company talked about UAH 1.7 billion needed to complete the completion of Ukrbud's residential complexes. Now this amount is likely to be much higher. Last year, the company asked KCSA to allocate UAH 1 billion from the city budget. But they were not in a hurry and are not in a hurry to co-finance the municipal developer and, logically, thus enrich everyone who has been involved in Ukrbud's construction projects at someone else's expense. KCSA had enough of its own schemers at times, but here you can't feed others. Also, Kyivmiskbud claimed at the time that they had spent UAH 800 million more on the completion of Ukrbud's residential complexes than they had received from the sale of their real estate and stingy transfers of installment money by Zhytlo-Capital. That's why everything is still standing.

What will happen next? Kyivmiskbud and investors are looking for money to complete the construction of houses. And the return of UAH 3.7 billion of the operational reserve, which was illegally transferred to the People's Aid Fund, by Zhytlo-Capital to the construction, could largely solve all the financial problems of the developer and get Kyivmiskbud's flywheel running again to complete residential complexes. But will it happen? This is investors' money, and it is much more than is currently being asked for by KCSA or other external sources.

June with instructions and another deadline from the National Securities and Stock Market Commission is just around the corner. And, of course, it's up to the SBI. It has long been obvious to many that without effective law enforcement intervention in the tangled octopus of Zhyttal-Capital and the return of investors' funds that disappeared in the structures of the manager and "guarantor" Kravchenko, it simply will not work.