23.05.2025 Investigations Money laundering

Billions down the drain: How corruption in Ukraine’s Defense Ministry undermines the country’s defense

Україна втратила $770 мільйонів на невдалих угодах на постачання зброї, – FT | Бізнес.Цензор

While Ukrainian defenders on the front line risk their lives to stop the enemy, another war is being waged in the high offices of the Ministry of Defense of Ukraine – for budget funds. Billions of hryvnias allocated for weapons, ammunition and supplies for the army disappear into the pockets of officials and affiliated companies.

770 million dollars lost to corruption

According to the Financial Times, Ukraine has lost about $770 million due to failed deals and corruption in arms procurement. In the period of 2022-2023, when the country was urgently trying to replenish its stocks of ammunition and equipment, a significant number of contracts were concluded with foreign intermediaries without proper verification. The result was the delivery of low-quality or non-existent weapons, and the money was lodged offshore.

One of the most egregious examples is the story of Tanner Cook, a 28-year-old American from Arizona who owned a small gun shop in Tucson. He received an order from Ukraine for tens of millions of dollars, but did not fulfill it. Although the court found the Ukrainian side to be right, the money was not returned.

Statistics show that many contracts were awarded at inflated prices, and Western companies still complain about corruption on the part of Ukrainian officials who demanded kickbacks or created obstacles to the execution of agreements.

The situation inside the country is no better. The Specialized Anti-Corruption Prosecutor’s Office confirmed large-scale embezzlement in the Defense Ministry in 2022-2023. During the time of Minister Oleksiy Reznikov, corruption schemes were built not only in the area of weapons, but also in the procurement of food for the army. Although Reznikov is not formally on trial, investigations point to systemic problems that flourished under his leadership.

Everest Limited scandal: UAH 722.6 million down the drain

One of the most high-profile examples of corruption is the Defense Ministry’s contract with Everest Limited worth UAH 722.6 million. The company was supposed to develop software for an automated troop management system, but had no relevant experience. Everest Limited’s participation in the tender was secured through lobbying by high-ranking officials of the Ministry of Defense.

Instead of creating the latest software, Everest Limited purchased off-the-shelf systems from affiliated companies such as Megapolis.DocNet, UnityBase Defense, and SMS Communication System. This resulted in unnecessary expenses in the amount of UAH 239 million, including:

  • UAH 98 million for “development of special software”;
  • UAH 141 million for modification and adaptation of systems.

The funds received by Everest Limited were transferred through a chain of intermediaries: Icusion IT, Integrity Business, Research Institute Avtoprom, and RKI Consulting. These companies supplied hardware and software products that did not meet the terms of the contract. The internal audit found that the troop management system was unusable and recorded violations in the amount of:

  • UAH 171.9 million – illegal expenses for postponement of deadlines, VAT payment and adjustment of documentation;
  • UAH 550.7 million – risk of loss of property due to lack of inventory;
  • UAH 15.2 million – expenses for software that was not used;
  • UAH 3.9 million – unjustified expenses for documentation;
  • UAH 263.7 million – allegedly overstated scope of work performed.

The NABU is currently investigating the scheme, and the aforementioned officials have been served with suspicions. However, this is just one example of how funds intended for the Armed Forces end up in the pockets of people close to the government.

Schemes under Umerov’s leadership: soldiers’ lives are at riskРустем Умеров: что за человек возглавит Минобороны Украины – DW – 04.09.2023

Under the leadership of Minister Rustem Umerov, the Ministry of Defense concluded fictitious contracts for the supply of weapons and equipment, overstating their cost by 2-3 times. The schemes involved individuals close to the minister and affiliated companies such as the Nizhyn Engineering Armament Repair Plant, NASH IMPORT LLC, MIK LLC, and L’viv Arsenal LLC.

Among the high-profile examples:

  • UAH 1.98 billion embezzled through fictitious contracts with controlled companies.
  • UAH 1.4 billion was spent on undelivered mortar shells from Lviv Arsenal LLC.
  • 317 million hryvnias were spent on low-quality uniforms from MIK LLC.
  • A contract for the repair of 10 anti-aircraft missile systems for UAH 20 million per unit, although the actual cost is much lower.
  • Supply of tactical gloves of dubious quality for 2.8 million hryvnias with an inflated price.

The military on the front line receive low-quality bulletproof vests that cannot withstand bullets, unreliable ammunition that can fail at a critical moment, and unusable ammunition that threatens their lives. These facts call into question not only the efficiency of procurement, but also the overall defense capability of the country.

How is corruption hidden?

To avoid responsibility, Defense Ministry officials resort to a number of manipulations:

  • Falsification of goods acceptance certificates to hide inconsistencies in deliveries.
  • Restricting access to financial documents, which complicates audits.
  • Manipulation of tender procedures to ensure that “their” companies win.
  • Pressure on investigators and journalists who reveal schemes.

Based on the revealed violations, statements were filed with law enforcement agencies, as well as complaints to regulatory authorities demanding to check the activities of the Ministry of Defense. However, investigations are often delayed, and perpetrators avoid punishment.

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