The city of Cleveland, Ohio, is hardly considered the most cosmopolitan or globalised city in the U.S. If anything, the Rust Belt city – whose population is less than half of what it was a century ago – is a symbol of industrial decline across America’s heartland, for a region whose best days are clearly behind it.
Which is why, as other major American cities like New York or Miami opened their doors to all kinds of oligarchic money out of places like Russia or Ukraine, Cleveland hardly got any attention as a destination for the kinds of illicit wealth spilling out of the former Soviet Union. Investigators searched out ill-gotten gains in Manhattan and Malibu. They ignored Cleveland, assuming globe-trotting oligarchs would never bother with a Midwestern city in clear decline.
How wrong they were.
As investigators and authorities now know, one of the most notorious oligarchs out of the former Soviet space oversaw a trans-national money laundering scheme of historic proportions – and used places like Cleveland, in addition to a number of other small towns across the American Midwest, to hide and launder hundreds of millions of dollars.
With no one paying attention, this oligarch, a Ukrainian national named Ihor Kolomoisky, steered one of the biggest Ponzi schemes in world history, and ended up becoming one of the biggest real estate landlords in mid-west America.
Kolomoisky may not be a household name, even with the recent uptick in interest in oligarchs and kleptocracy. But just because he’s perhaps less known than oligarchs like Roman Abramovich doesn’t make Kolomoisky any less important – or, for those in Ukraine, any less dangerous.
Born in Soviet Ukraine in 1963, Kolomoisky scrambled to make a living during the Soviet collapse of the early 1990s. Emerging in newly independent Ukraine, Kolomoisky followed a range of other oligarchs around the region, pocketing formerly state-owned enterprises like steel plants to gas wells at fire-sale prices.
Kolomoisky had two advantages over other nascent oligarchs, though. First, he had a background in metallurgy – in the science of making and moulding metals and alloys in demand. Secondly, Kolomoisky displayed a ruthlessness that made even other oligarchs, no strangers to violent crime, blanch.
Engaging in reiderstvo, or outright raiding, Kolomoisky seized asset after asset across Ukraine, reportedly paying off local judges and magistrates in the process.
One instance, as Forbes reported, saw ‘hundreds of hired rowdies armed with baseball bats, iron bars, gas and rubber bullet pistols and chainsaws forcibly [take] over’ a steel plant that Kolomoisky eyed.
Elsewhere, Kolomoisky once lined the lobby of a Russian oil company he wanted to push out with a series of coffins. For the full
Bond villain effect, he even maintained a shark tank in his office, which he would fill with bloody chumwhenever he wanted to intimidate a visitor.
For the public, though, Kolomoisky tried to maintain a jovial persona. Chubby, often seen chuckling, Kolomoisky earned the nickname ‘Benya’, after the cuddly, eponymous Soviet-era cartoon lion. He ‘tries to create an image that he’s a kind grandpa, this kind, funny old man,’ Daria Kalenyuk, one of Ukraine’s leading anticorruption advocates, told me.
By the mid-2010s, Kolomoisky was one of the most powerful figures in Ukraine. The oligarch even grew his portfolio to oversee one of Ukraine’s biggest banks, PrivatBank, refashioning himself as a steward of Ukraine’s finance sector. In the aftermath of Ukraine’s 2014 EuroMaidan Revolution, when Russian troops first began pushing into Ukraine, the oligarch then refashioned himself into a supporter of Ukrainian statehood.
Bankrolling a new militia in central Ukraine, the oligarch said in the third person, ‘A large number of people think Kolomoisky’s great – and the only patriot in the country.’
Others saw something different: an oligarch turned into a warlord, building his own power base in the middle of the country. ‘I think Kolomoisky is super-dangerous,’ one American diplomat later said. ‘He was one of the first oligarchs who began to act like a warlord.’
When a new government rose in Kyiv, and new reformers swept into power, they had questions about how it was that Kolomoisky could afford his empire. And when they began looking into PrivatBank’s books, they came away shocked. Billions were missing. The cupboards were, in essence, bare – no one knew where the money had gone.
Immediately, the government rushed a $5.5-billion bailout to PrivatBank, trying to patch this gaping hole in one of the country’s biggest banks. And then they began looking for the disappeared funds – and discovering the money buried in places they never expected, like Cleveland.
As both Ukrainian investigators and American authorities have detailed, Kolomoisky allegedly oversaw a multi-year, multi-national money laundering scheme meant to loot billions from unsuspecting Ukrainian depositors. On paper, PrivatBank made it seem that a wide range of loans were being fully repaid. In reality, though, those loans never came back to the bank – but instead ended up in entities overseen directly by Kolomoisky. Using shell companies and offshore accounts, much of that money ended up in the US.
But instead of going to places like San Francisco or Los Angeles, that money went places few suspected. The funds ended up in office buildings in Cleveland and Texas. It ended up in steel mills in Kentucky and West Virginia. It ended up in manufacturing plants in Michigan and Illinois. Small towns, steel towns, factory towns – the money Kolomoisky allegedly pilfered ended up drenching blue-collar America.
According to those on the receiving end of the funds, Kolomoisky’s network pledged the money would be used for new investments, for the kinds of economic revitalization the region had long needed. Years later, it was clear that revitalization would never come.
As the Ukrainians and Americans allege, Kolomoisky was never interested in actual investment or profit, but in just getting his money out of Ukraine. And because places like the U.S. offer all the financial secrecy tools these oligarchs need – from anonymous shell companies to anonymous real estate purchases to the lack of basic anti-money laundering policies across the board – Kolomoisky found it all too easy to hide his money for years. The U.S. directly sanctioned Kolomoisky in early 2021, announcing his ‘involvement in significant corruption.’
Volodymyr Zelensky, Ukraine’s now President, would not be where he is today without Kolomoisky. As an actor and entertainer, Zelensky had worked for Kolomoisky’s media network — which then gave him form support when he stood as a candidate. Zelensky was seen as the Kolomoisky candidate: he appointed one of Kolomoisky’s lawyers as an adviser, and held meetings with the controversial oligarch even as he campaigned as the ‘anti-oligarch’. In early 2021, Zelensky reportedly breached his own Covid lockdown rules to have a birthday party in Kolomoisky’s Kyiv apartment.
Today, Zelensky and Kolomoisky appear to have grown apart. Whereas the oligarch once claimed to be a patriot, in recent years he’s begun calling for a new partnership between Ukraine and Russia.
When that happens, Kolomoisky said, ‘NATO will be soiling its pants and buying Pampers.’
That’s not a remark that will appeal to the many Ukrainians now suffering from Russia’s bloody invasion, and whose country’s wealth has been endlessly plundered by a string of greedy oligarchs.
It’s also little comfort to those in places like Cleveland, who watched a post-Soviet oligarch sweep in and add their city to his trans-national money laundering network – and watched his promises of revitalisation collapse, leaving nothing but empty husks in his wake.
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