Ukraine's SPF to check possible Russian origin of funds of Dnipro Hotel auction winner.

The investor who has won the auction will be vetted for compliance with legal requirements.

Dmytro Sennychenko Photo from UNIAN

Dmytro Sennychenko Photo from UNIAN

Head of Ukraine's State Property Fund (SPF) Dmytro Sennychenko says the SPF sent inquiries to law enforcement and other government agencies to find out the origin of the funds of LLC Smartland, which won the auction to acquire Dnipro Hotel located in the center of Kyiv.

Read alsoKyiv's Dnipro Hotel sold for US$41 mln – SPF

Checking the origin of funds

Sennychenko says that Ukrainian legislation prohibits investing money of Russian origin in Ukrainian assets. The investor must not be from the aggressor state, he wrote on Facebook on July 17.

The investor who has won the auction will be vetted for compliance with legal requirements. The SPF forwarded relevant inquiries to law enforcement and other agencies to check the origin of the investor's funds.

The SPF will decide whether to sign a purchase agreement with the winner only after the response is favorable.

"If it turns out that the winner of the auction is a Russian [company], or that its capital is of Russian or any other shady origin, the State Property Fund will not conclude a purchase and sale agreement. It is our right and duty not to allow Russian and shady capital into state enterprises during the privatization campaign," he said.

What happens if the deal is canceled

According to the procedure, the runner-up with the next highest bid will be named the winner of the auction.

A similar vetting procedure will be applied to the new auction winner.

Regardless of the results of the check, the deposit for participation in the auction (10% of the starting price of the asset) is not returned to the bidders.

"In this particular case with the hotel: if it turns out that Russians or other entities subject to other prohibitions are somehow involved in the purchase, they will be denied to buy the asset, but over UAH 8 million [US$292,398] in the collateral they contributed will remain in the state treasury in any case. Not a bad punishment for impudence," he added.

Dnipro Hotel: Changes in price

In February 2020, the State Property Fund planned to sell Dnipro Hotel, located on Kyiv's European Square, at an auction with a starting price of US$10 million. Later, the starting price dropped to UAH 81 million (US$2.96 million).

The starting price after the beginning of the online auction rose to UAH 711 million (US$25.99 million).

As a result, the hotel was sold for UAH 1,111,111,222.22, or US$41 million, whereas the starting price was set at UAH 81 million, or US$2.96 million.

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