Serhiy Lyamets: Kernel is seeking $39 million from "Sens Bank." Why this case is of national importance
The Ukrainian group Kernel, owned by Andriy Verevskyi, the country’s largest sunflower oil trader, has filed a lawsuit against the state-owned “Sens Bank.” Kernel is demanding that the state-owned bank pay $39 million, which is equivalent to 1.75 billion hryvnia.
The intrigue lies in the fact that this $39 million has nothing to do with either “Sens Bank” or the state. Verevsky himself acquired the right to claim these funds as a result of a rather unusual agreement. Moreover, he already has a confirmed obligation to repay this debt in 2029.
However, the businessman decided to go to court to get the money now, rather than in three years. As a result, the systemically important state-owned “Sens Bank” has come under serious pressure.
The lawsuit was filed with the Kyiv Commercial Court by the Cypriot offshore company Etrecom Investments Limited, which is part of the Kernel Group. The lawsuit is a joint and several claim—against another Cypriot company, Greatford Limited, and directly against “Sens Bank.” The court is being asked to collect the funds from several defendants, and only then can they sort out among themselves who exactly is responsible for paying. The problem is that Greatford Limited is effectively a shell company, so the actual funds will have to be paid to the state-owned bank, which has no connection to this transaction. Essentially, Veretsky decided to seek the money where it is, by slightly reworking the legal structure.
The lawsuit poses significant risks for “Sens Bank,” which only recently weathered the so-called “Mindich-gate” scandal. Kernel is attempting to obtain funds from the state-owned bank on rather dubious grounds. If it succeeds in collecting this debt, the bank could face an avalanche of similar lawsuits amounting to billions of hryvnias.
And that is no exaggeration.
HOW THE DEBT AT THE CENTER OF KERNEL’S LAWSUIT AROSE
As is well known, in July 2023, the state nationalized “Sens Bank” for 1 hryvnia. Shortly before that, the bank had been looking for a way to repay a significant sum to Kernel. It could not repay the debt directly, as the National Bank of Ukraine had effectively banned large payments. Therefore, an elegant solution was found: the debt to Kernel was settled using Loan Participation Notes (LPN). It is precisely through these securities that Veretsky is currently attempting to recover funds from the state-owned bank.
LPNs are bonds issued by the Dutch company EMIS to finance the “Sens Bank” group. This refers to a period long before nationalization.
The mechanism worked as follows. A special purpose vehicle (SPV) was established in the Netherlands to pool investors’ funds and subsequently channel them to “Sens Bank.” This is a typical instrument of the international financial market. Its purpose was not so much financial as it was legal—to transfer funds from the less secure Ukrainian jurisdiction to the more stable Dutch one.
In the context of the current legal dispute, it is important to understand that “SENS” sold these bonds, but they were not bonds issued by the bank itself. It acted as an intermediary, just as it might offer insurance products. The bank offered LPNs to its VIP clients as part of one of the strongest private banking divisions in Ukraine at the time. The securities provided higher foreign-currency returns, which is why many clients preferred them over foreign-currency deposits or government bonds.
The Dutch entity then transferred the raised funds as a loan to the Ukrainian “Sens Bank,” which in turn used them for lending. Essentially, VIP clients were offered a share in the profits from the loan portfolio, hence the name “Loan Participation Notes.”
These were the very securities that Verevsky received. Legally, Kernel did not receive them from “Sens Bank” or even from the Dutch company EMIS, but from the Cypriot company Greatford. At the time, Greatford was a subsidiary of the Ukrainian bank. At the same time, Kernel itself registered the securities not in the name of its main Luxembourg-based company, but in the name of the Cypriot company Etrecom Investments Limited.
In other words, one Cypriot offshore company transferred securities issued by a Dutch entity to another Cypriot offshore company.
Shortly thereafter, “Sens Bank” was nationalized. Kernel was left holding LPNs from the Dutch company worth $39 million. I am describing this scheme in such detail solely to show that this dispute has an extremely indirect connection to the state-owned bank.
AN ANALOGY WITH ICU
An interesting comparison comes to mind here.
I have previously written about LPN bonds, recounting the story of the Investment Capital Ukraine (ICU) group, owned by Makar Pasenyuk and Kostyantyn Stetsenko. At the time, this group also acquired a significant stake in these securities. The instrument was indeed considered high-quality. This is evidenced by the fact that ICU later bought additional bonds from other holders—albeit at a discount.
After nationalization, the LPN bonds ended up in the hands of hundreds of Ukrainian investors. Out of respect for the issuer, the Dutch company EMIS did not refuse to fulfill its obligations but proposed a restructuring. Most bondholders agreed to wait about six years.
Kernel was among them. The LPN series, owned by Etrecom, was successfully restructured in March 2025. The maturity date was extended to February 2029. In other words, Veretsky is effectively trying to obtain the funds before the previously set deadline and, to that end, has chosen to pursue recovery from “Sens Bank.”
ICU, however, decided to take a different approach. Pasenyuk and Stetsenko refused to agree to the restructuring, blocking it for two bond series in which they held a controlling voting stake. As a result, other bondholders found themselves held hostage, unable to implement the restructuring due to a lack of votes.
In my opinion, ICU’s goal was to buy these bonds from the minority at a significant discount, and then restructure the entire portfolio on its own terms to make even more money. Yes, this is not far from blackmail. However, this style of operation is entirely consistent with ICU’s reputation.
In fact, Verevsky is acting in a similar manner. Kernel’s lawyers are well aware that the current “Sens Bank” is state-owned and has no connection whatsoever to LPN, EMIS, or Greatford. Following the nationalization, representatives of the Ministry of Finance repeatedly emphasized that the bank is not liable for these bonds.
However, Verevsky decided otherwise. After all, the bank has the money. That is precisely why Kernel chose to go to court, unwilling to wait until 2029. In its legal position, the company effectively treats Greatford and “Sens Bank” as a single entity.
This sounds strange, considering that Greatford is subject to Ukrainian sanctions, and “Sens” has long since been nationalized. However, the Ukrainian judicial system is so unpredictable that Kernel still has a chance of winning. And this poses a potential problem for the state budget.
RISKS TO UKRAINE’S STATE BUDGET
Nationalization means that “Sens Bank” is owned by the Ukrainian people, whose interests are represented by the Ukrainian government, specifically the Ministry of Finance.
Following its nationalization, “Sens” faced serious capitalization problems. Formally, the bank violates a number of regulatory standards and, by law, should be removed from the market. However, due to its status as a state-owned bank, liquidation is impossible, so a financial rehabilitation regime was effectively established for it. The NBU made an exception to the general rules and gave the bank time to recover. In return, the Ministry of Finance set a clear task for management: to generate revenue wherever possible. This includes serving the gambling market, as has been repeatedly noted by the National Anti-Corruption Bureau of Ukraine (NABU) and the Verkhovna Rada’s Temporary Investigative Commission.
The bank must close the financial gap on its own as quickly as possible. Otherwise, the state will have to recapitalize it using billions of hryvnias from the budget. The IMF and the European Union are overseeing this entire structure, having included “Sens Bank” in the list of key benchmarks for their support programs for Ukraine.
Now let’s imagine that Kernel wins the $39 million lawsuit. In hryvnia terms, that’s about 1.75 billion UAH. To pay out these funds, the bank will have to withdraw part of its equity capital, which means the financial hole will grow even larger. The Ministry of Finance will have to either recapitalize the bank using state budget funds or drag out the process of its financial recovery for years, risking a breach of its commitments to the IMF and the EU. Most likely, the government will choose the first option—additional capital injections.
The logic here is quite simple: in effect, Kernel will receive money from the state budget. And this may be just the beginning. Immediately afterward, other holders of LPN bonds may take their cases to court. After all, this would open up the possibility of not having to wait years for payments from the Dutch entity, but instead receiving money right now—from a Ukrainian state-owned bank.
Try to look at the situation through the eyes of officials at the Ministry of Finance. Finance Minister Serhiy Marchenko’s position on all issues related to “SENS Bank’s” capital has long been known. Even during the high-profile session of the parliamentary investigative commission dedicated to the problems of the nationalized bank, he emphasized not so much the issue with Mindich as the inadmissibility of collecting debts owed by former owners from the state-owned bank.
Is it even necessary to explain what prospects a victory for Kernel would open up? All LPN bondholders could claim payments from “SENS Bank”—and, in effect, from the state budget. True, Ukraine is not a common-law country, and each case is considered on its own merits. But in practice, it would be difficult to explain to other bondholders why what was permitted for Kernel cannot be permitted for them.
The next court hearing in this case will take place on June 30. Without a doubt, the proceedings will be of great significance.
WHO IS ETRECOM
It is also worth considering the reputational aspect.
I noticed that Kernel has not publicly announced the lawsuit against “Sens Bank” anywhere. The formal plaintiff is the Cypriot company Etrecom Investments Limited, not Kernel Holding S.A. It was this entity that issued the LPN bonds.
Kernel will likely try to create the impression that this offshore company operates separately from the group. However, this will not be easy, since Etrecom is, in fact, the financial hub of one of Ukraine’s largest agricultural holdings.
The parent company of this entity is the Luxembourg-based Kernel Holding S.A., which owns a land bank, processing plants, terminals, and other assets in Ukraine. It was established specifically to list shares on the Warsaw Stock Exchange (KER.WA).
Meanwhile, the “younger brother”—the Cypriot offshore company Etrecom Investments Limited (registration number HE 204363)—serves as the group’s financial hub. It is through this company that liquidity management, the distribution of investment income, the payment and receipt of dividends, accounts receivable management, and investments in government bonds and investment funds are handled.
In addition, Etrecom acts as a lender to the group’s Ukrainian companies and as a guarantor for Kernel’s external debt obligations. For example, in 2017, this company provided a loan to the Ukrainian company Kernel Trade L.L.C. in the amount of over $21 million at an annual interest rate of 9.8%. It was through Etrecom that the acquisition of claims against PJSC “Creative”—with a nominal debt amount of over $81 million—was formalized in 2016 for $15 million.
Etrecom Investments Limited also owns Reni-Oil LLC, the operator of a sunflower oil storage and transshipment terminal in the port of Reni. In Kernel’s annual report, this asset is described as a terminal with a capacity of up to 700,000 metric tons of oil per year, acquired in fiscal year 2024.
Etrecom, in turn, is wholly owned by Kernel Holdings S.A., whose shares are traded on the Warsaw Stock Exchange.
In other words, Etrecom is not a technical “front” or a third-party company. It is one of the group’s key entities.
Moreover, it can be argued that today this offshore entity effectively represents the interests of Andriy Verevsky himself. Since 2023, Kernel has been undergoing the delisting process from the Warsaw Stock Exchange. The holding company is gradually transforming from a public company into a private business, over 95% of which is controlled by Verevsky.
In recent years, the majority shareholder has been carrying out a squeeze-out—the buyout of minority shareholders’ stakes. The shares of investors who exited the company’s capital were purchased specifically through Etrecom. This process continues, at prices that many consider to be significantly undervalued.
The reason lies not only in the war. When comparing the ratio of market value to company profits, Kernel trades at a much larger discount than other Ukrainian agricultural groups that are also operating under wartime conditions. Critics attribute this specifically to the behavior of the majority shareholder, who is interested in buying back shares at the lowest possible price.
In this context, Etrecom’s lawsuit against Sens Bank can be viewed as Verevsky’s personal lawsuit against the state.
KEY LEGAL ISSUE
The main problem lies not at all in the relationship between Etrecom and Greatford—the very sanctioned offshore entity that once transferred the LPN bonds.
What, if anything, can be recovered from a technical company that has no assets?
The key question lies elsewhere: can a state-owned bank be held liable?
Indeed, why should “Sens Bank” bear joint and several liability if the financial instrument was purchased from Greatford? What does a state-owned bank have to do with the obligations that arose between two Cypriot companies regarding the securities of a Dutch issuer?
In my opinion, there is only one answer: Greatford has no money. But Sense Bank does.
That is precisely why a legal construct was devised under which the state-owned bank is held liable for the obligations of the former owners.
Following this logic, one Cypriot offshore company is suing another Cypriot offshore company in a Ukrainian court. The formal basis for this is that “Sense Bank” falls under Ukrainian jurisdiction, and therefore the dispute can be heard in Ukraine.
In theory, the scheme looks sophisticated. But the practice of nationalizing banks such as “Ukrgasbank” and “PrivatBank” shows otherwise: the liability of former owners does not transfer to the state. And today, it is difficult to imagine a court that would rule otherwise.
Moreover, there are risks for Verevsky himself. From the perspective of Ukrainian law, the agreement between Kernel and “Sens,” concluded on the eve of nationalization, could raise additional legal questions.
There are numerous similar cases in the practice of the Deposit Guarantee Fund. On the eve of bankruptcies, bank owners often used schemes involving the assignment of claims, whereby, instead of actually returning funds to depositors, they transferred the debts of other customers to them. Formally, this appeared to be a mutual setoff or assignment.
Sometimes billions of hryvnias were reallocated in this way in a single day, even though not a single actual hryvnia was actually transferred.
When banks entered liquidation proceedings, the Deposit Guarantee Fund often challenged such transactions in court and sought to have them declared null and void.
It is possible that a similar risk exists regarding the agreement between the former owners of “Sens” and Kernel, since it was finalized immediately before the bank’s nationalization.
I would suggest that the Ministry of Finance use this argument. Otherwise, the bank will have to be recapitalized at the expense of the state budget—which amounts to billions of hryvnias. I hope that “Sens Bank” and the Ministry of Finance will defend the state’s interests and bring the situation back to a place of common sense. Even if one of Ukraine’s largest oligarchic groups is suing you, that is no reason to sacrifice national interests. A country at war cannot afford to recapitalize state-owned banks the way it was done in peacetime.
WHAT ARE KERNEL’S CHANCES?
Let’s try to assess the legal prospects of this case. There are certainly some chances. Nationalization in and of itself does not cancel the commercial debts of the bank as a legal entity. Joint and several liability is theoretically possible if a direct link can be proven between Greatford (the former owners of “Sens”) and the Ukrainian government (the bank’s current owner). As you understand, no such link exists. But in the view of Verevsky’s lawyers, Etrecom could win the lawsuit, and then “Sens Bank” would have to pay $39 million.
In my opinion, this is a major misconception. Kernel will have to explain exactly what agreement was concluded between Greatford and Etrecom. Was there a guarantee or surety provided by “Sens Bank”? How strong is the legal connection between the bank and Greatford? How exactly was the debt assignment formalized, and did the signatories have the right to carry out such an assignment? Why were the LPNs transferred through a Cypriot offshore entity? And, ultimately, how can one prove that Greatford is the bank’s “alter ego”? In Ukraine, “piercing the corporate veil” is an extremely difficult process—this isn’t London.
If it loses, “Sens” will file an appeal and then, if necessary, take the case to the Supreme Court. To be honest, I find it hard to imagine that such a case could be won in the Supreme Court, especially when it involves a dispute with the state. This is all the more true following the verdict against the former head of the Supreme Court in the Zhevago aid case. At this stage, players of an entirely different caliber are entering the fray, and even the Kernel Group is unlikely to be able to counter their influence.
One of the provisions of the IMF’s cooperation program with Ukraine contains so-called structural benchmarks regarding state-owned banks (SOBs). This involves not only improving corporate governance but also reducing risks, increasing profitability, and further privatization. Similar requirements are also included in the European Union’s policy documents regarding Ukraine. The Cabinet of Ministers has already pledged to privatize “SENS” and “Ukrgasbank,” and work in this direction is ongoing. The 2023 nationalization itself was supported by international partners as a tool to counter Russian influence in the banking sector.
From this perspective, involving the Ministry of Finance in this legal proceeding is a rather risky move for Kernel. It appears that Ukraine’s largest sunflower oil exporter is effectively entering into a confrontation with an entire system backed by the IMF and the EU. I find it difficult to imagine a scenario in which the company could recover its money while avoiding reputational damage—especially given how much the group’s business depends on constructive relations with the government.
A defeat for “Sens Bank” alone would not constitute a breach of the terms of cooperation with the IMF or the EU. However, the court’s decision will create an additional fiscal risk that international partners will certainly monitor. If significant sums are involved or there is a series of similar lawsuits, this could affect the assessment of the sustainability of Ukraine’s public debt. The IMF and the EU may well ask: Is it worth continuing funding under the same terms? It is precisely these nuances that transform a “routine commercial case” into a matter of national importance.
However, let me remind you: all of this is possible only if the Kyiv Commercial Court rules in Kernel’s favor. But what are the chances of such an outcome, even with the court’s most favorable disposition?
Another scenario seems far more likely: even a court sympathetic to Kernel might reject the claims specifically against “SENS Bank,” leaving Greatford as the sole defendant. And Greatford is a shell company with virtually no assets.
This raises a simple question: what’s the point of all this? Why take on such reputational risks and turn the government against you?