Ukraine’s SBU security service said on Saturday it had uncovered a corruption scheme in the purchase of arms by the country’s military totalling the equivalent of about $40 million.

The announcement of mass procurement fraud, confirmed by Ukraine’s Defense Ministry, will have a huge resonance in a country beleaguered by Russia’s nearly two-year-old invasion.
The fight to root out endemic corruption remains a major issue as Ukraine presses its bid to secure membership in the European Union.
The SBU said an investigation had “exposed officials of the Ministry of Defense and managers of arms supplier Lviv Arsenal, who stole nearly 1.5 billion hryvnias in the purchase of shells.”

The company was said to be founded by Yurii Zbitniev, who became one of the youngest members of the Soviet-era unicameral parliament of Ukraine, known Verkhovna Rada, in 1990. 

“According to the investigation, former and current high-ranking officials of the Ministry of Defense and heads of affiliated companies are involved in the embezzlement.”

The embezzlement, it said, involved the purchase of 100,000 mortar shells for the military.
The SBU said a contract for the shells was clinched with a little-known company called Lviv Arsenal in August 2022 — six months into the war — and payment was made in advance, with some funds transferred abroad.
But no arms were ever provided, the statement said, with some funds then moved to other foreign accounts.
The statement said five individuals had been served “notices of suspicion” — the first stage in Ukrainian legal proceedings — both in the ministry and the arms supplier. One suspect, it said, was detained while trying to cross the Ukrainian border.

A report by the online site Ukrainska Pravda on Jan. 26, 2024, said Ukraine's Northern Commercial Court of Appeal has upheld the decision of the first instance court to recover 1.5 billion hryvnias (about US$40.7 million) in favor of the Ministry of Defense from Lviv Arsenal company.
It said the Kyiv Commercial Court is also considering a court case on the additional recovery of 163.5 million hryvnias (about US$4.4 million) in penalties in favor of the defense ministry.
"As part of this case, bank accounts and other movable and immovable property belonging to Lviv Arsenal were seized," the report said.
Corruption within the military has been a particularly sensitive issue in Ukraine as it tries to maintain wartime public morale and present its case to join the 27-nation EU.
Defense Minister Oleksii Reznikov was dismissed last September over various corruption cases despite enjoying a solid reputation in representing Ukraine in its discussions with Western allies.
Although he was not alleged to have engaged personally in corruption, several cases hit the military under his stewardship, including his authorizing an advance payment of almost 100 percent of the contract amount for Lviv Arsenal, according Ukrainska Pravda. The other cases mentioned include food supply for troops and another over procuring suitable clothing for servicemen.