The “Kyivmiskbud” crisis: from a construction pyramid scheme to political manipulation and legal nihilism

Introduction: A Multi-layered Disaster

The “Kyivmiskbud” crisis has long been about more than the bankruptcy of a single company. It is a symptom of a chronic disease that has affected the capital’s management system, a multi-layered crisis that has exposed its deepest pathologies. On the surface lies an economic disaster — a classic construction pyramid scheme that has left thousands of people without money and housing. Deeper down is a cynical political technology that turns human grief into an electoral resource. And at its very foundation is a conscious legal nihilism and disregard for fundamental legal norms that allows this system to exist and thrive.

That is why the authorities’ attempt to “save” the company by injecting UAH 2.5 billion into it cannot be considered a cure. It is merely a painkiller that temporarily relieves the symptoms but actually preserves the disease, allowing it to develop further. This article proves that the problem is not in individual mistakes, but in the system itself, and without its fundamental restructuring, any budget injections will inevitably be embezzled, only deepening the crisis.

Diagnosis: The Collapse of a Systemic Pyramid

The story of “Kyivmiskbud” is a classic example of the transformation of a reliable state-owned enterprise into a private structure whose main goal was not the construction of housing, but the withdrawal of assets. Established in 1955, the company was a symbol of reliability, but after its privatization in 2004, it turned into a tool for the enrichment of a narrow circle of people.

The mechanism was simple and effective:

1. Attracting investors’ funds under a brand with high trust.
2. Withdrawing money through affiliated subcontracting companies and fictitious contracts.
3. Bringing the company to financial exhaustion.
4. Shifting the responsibility for completing construction to the city budget, under the guise of external factors such as war or economic crisis.

Political Technology: Votes in Exchange for the Illusion of Salvation

The decision on recapitalization should be seen not as an economic step, but as an element of the election campaign that has already effectively started in Kyiv. This technology works according to a clear, cynical plan:

• Creating an electoral asset: Thousands of defrauded investors and their families are not just victims. They are an ideal electoral asset: united, emotionally charged, and driven to despair. Years of uncertainty, lost savings, and shattered dreams make this group extremely vulnerable to any promises. They are ready to support not the one who offers a realistic plan, but the one who is the first to give at least a glimmer of hope, regardless of its sincerity.
• The role of the “savior”: The decision on recapitalization becomes a central element of the political spectacle. The current government or individual politicians get the opportunity to try on the role of “savior.” This is played out through loud statements on television, meetings with investor initiative groups, and publications in the media, where the emphasis is not on the complexity of the problem, but on the very fact of “allocating funds.” Thus, an image of a decisive leader who “solves” problems is created, although in reality, there is only an imitation of activity.
• Manipulation instead of a solution: The real goal of this scheme is not to complete the apartments, but to convert budget funds into electoral votes. The allocated amount of UAH 2.5 billion, according to experts, is catastrophically insufficient to complete all the projects, where the real need can reach tens of billions. This makes the project a failure from an economic point of view in advance, but extremely effective from a political one. The authorities get an instant PR effect, and the real solution to the problem is postponed indefinitely.
• Human tragedy is turned into a political resource. Human grief, fear, and hope are cynically turned into a bargaining chip in a political game. This is not just manipulation; it is the destruction of the very foundation of the social contract. When the elections are over and the money runs out, the responsibility for the inevitable failure can easily be shifted to “objective circumstances”: war, inflation, bureaucracy, or even the investors themselves, accusing them of “excessive demands.”

Legal Assessment: Legal Risks of the Kyiv City Council’s Decision

At first glance, the Kyiv City Council’s decision to increase the authorized capital of PJSC “HC ‘Kyivmiskbud'” may seem like a technical or even socially motivated step. However, a detailed analysis reveals a whole range of legal risks and potential violations that turn this decision into a dangerous precedent:

• Violation of the principle of targeted and effective use of budget funds

According to Article 7 of the Budget Code of Ukraine, all expenditures must be made taking into account efficiency, effectiveness, and their targeted nature. The allocation of UAH 2.5 billion for recapitalization without an approved and verified plan for the completion of facilities, work schedules, cost estimates, a company audit, and the results of inspections by state bodies (the State Audit Service of Ukraine, the prosecutor’s office, the NACP, the NABU) is evidence of the inefficient disposal of public funds. This may qualify as abuse of office (Article 364 of the Criminal Code of Ukraine) or misuse of budget funds (Article 210 of the Criminal Code of Ukraine).

• Conflict of interest and signs of lobbying for private interests at the expense of the community

PJSC “HC ‘Kyivmiskbud'” is a private joint-stock company, not a unitary municipal enterprise, and this legal form is crucial. In accordance with the Civil Code of Ukraine and the Law “On Joint-Stock Companies,” shareholders are not liable for the company’s obligations and risk only the value of the shares they own.

This creates a legal conflict: the territorial community, as the majority shareholder, is not legally obligated to cover the company’s debts. However, the decision on recapitalization effectively forces it to do so, directing billions from the budget to save a commercial structure. Thus, public funds are used to cover private commercial risks and the consequences of inefficient management, while other private shareholders and the management that led to the crisis bear no financial responsibility. This is a clear sign of lobbying for private interests at the expense of the community, as it involves recapitalization with the risk of non-transparent use of funds, without mechanisms for proper control and public reporting.

Key threat: the community pays from the budget to cover debts for which it is not legally responsible, and at the same time has no guarantees that it will receive housing or other property in return.

• Probability of violation of anti-corruption legislation

Formally, recapitalization can be considered as state aid to a business entity. In accordance with the Law of Ukraine “On State Aid to Business Entities,” it is subject to mandatory approval by the Antimonopoly Committee of Ukraine. Otherwise, it may be illegal state aid, which entails an obligation to return the funds to the budget.

• Possibility of judicial appeal and criminal proceedings

The Kyiv City Council’s decision is legally vulnerable, which opens the way for numerous lawsuits and investigations that can block its implementation. Proceedings can take place in several areas:

• In the administrative court: Public activists or deputies can file a lawsuit accusing the Kyiv City Council of exceeding its powers and violating budget legislation. The argument will be that the allocation of funds to a commercial structure without proper justification contradicts the principles of efficiency and targeted use of public finances.
• In the commercial court: Competitors in the construction market can challenge the decision as one that creates discriminatory conditions. Granting advantages to one company at the expense of the budget violates antitrust laws and can be recognized as illegal state aid that distorts market competition.
• In anti-corruption bodies (NABU, SAP): The decision may become the basis for criminal proceedings. The investigation may concern a possible corrupt conspiracy between officials of the Kyiv City Council and the beneficiaries (the company’s management, affiliated contractors). The basis for the investigation may be suspicion of abuse of power in order to obtain an unlawful benefit for third parties, which is the direct jurisdiction of the NABU.

• Lack of proper inventory and audit of assets

Without an open independent audit and inventory of property, the decision on recapitalization can be considered legally unfounded. This violates the principle of proper management of municipal property (Article 60 of the Law of Ukraine “On Local Self-Government in Ukraine”).

Legal conclusion:

The Kyiv City Council’s decision is not only economically inefficient but also legally extremely vulnerable, which makes it a dangerous precedent. Its implementation without a proper legal basis, a transparent audit, and effective control mechanisms creates high risks of large-scale corruption, as billions in flows are directed into a non-transparent structure. It also opens a direct path to the misuse of funds, where community money will be spent on anything but the actual completion of housing. Most importantly, this decision creates personal legal risks for everyone involved, opening up the possibility of bringing individual officials to criminal liability for abuse of power or official negligence in the future.

Analysis from the perspective of the interests of the territorial community

The most painful thing in the whole situation is that it is the territorial community of Kyiv that is actually the main donor of this fraudulent scheme. The allocation of UAH 2.5 billion for the recapitalization of “Kyivmiskbud” is not an abstract financial maneuver — it is real money from the city budget that could have been directed to critical social and infrastructure needs:

• Urgent repair of emergency bridges, in particular the Metro Bridge and the Paton Bridge, the destruction of which threatens not only a transport collapse for the entire city, but also the death of hundreds of people.
• Prevention of the destruction of the metro, which has already manifested itself in the accident on the “Demiivska” – “Lybidska” section, and the modernization of other critical sections.
• Repair of the worn-out sewage system, due to which the city suffers from large-scale floods after every significant downpour.
• Construction of housing for internally displaced persons and veterans who have been on waiting lists for years.
• Modernization of schools, hospitals, and the construction of reliable shelters, which is a matter of security in a time of war.
• Support for condominiums and energy modernization programs to reduce utility payments for Kyiv residents.

These funds are the taxes of Kyiv residents, from small businesses to every employee, and the community has every right to know and control how they are spent.

A direct injection of budget money into a dubious business project without guarantees of a result is, in fact, a gift at the expense of the community to those who have been withdrawing assets from the company for years. This decision is not just ineffective; it deliberately divides society, applying the classic principle of “divide and conquer.”

It is also worth considering that as a result of such decisions:

• Social tension is growing and artificial conflicts are being created: The authorities are deliberately pitting several groups of affected Kyiv residents against each other. On the one hand, there are the “Kyivmiskbud” investors who are demanding their apartments. On the other hand, there are the Kyiv residents who have lost their homes as a result of Russian shelling and need help. And also all the residents of the city who are at daily risk of becoming victims of man-made disasters due to emergency bridges and worn-out infrastructure. Instead of uniting the community around solving common problems, the authorities are forcing some victims to compete with others for budget funds. This distracts attention from the real culprits of the crisis and allows for the manipulation of public opinion.
• Trust in local self-government is being destroyed, as resources are being spent not on the needs of the community, but on the interests of the construction lobby.
• The city’s investment attractiveness is declining, as legal uncertainty and non-transparent decisions create risks for business.

Thus, the decision on recapitalization directly contradicts the interests of the community, since it:

• Does not provide transparent guarantees of a result.
• Supports private (affiliated) interests with public funds.
• Negates the principles of social justice and effective governance.

A way out of the impasse: A plan to save the city, not the schemes

Stating the problem is not an end in itself. To break this vicious circle, decisive and systemic steps are needed:

1. Cancellation of the recapitalization decision. Instead of pouring money into a “black hole,” initiate a full, independent audit of “Kyivmiskbud” with the involvement of international audit companies and the public.
2. Creation of a single register of investors and assets. Conduct a full inventory of all the company’s facilities, liabilities, and assets to get a real picture of its financial condition.
3. Criminal proceedings and confiscation. Based on the audit data, law enforcement agencies should open proceedings against the management and related persons with the aim of confiscating illegally acquired assets and directing them to a completion fund.
4. Creation of a single public law entity — the Territorial Community of Kyiv. Instead of the ineffective recapitalization of the existing non-transparent structure, which only preserves the problems, it is necessary to implement a more fundamental reform. This idea, which is substantiated by Ukrainian scholars in the field of municipal law and economics, in particular Vyacheslav Morgun, is to create a single economic entity of public law — the “Territorial Community of Kyiv”.
   Unlike private companies, whose main goal is to maximize profits for their owners, such an entity will operate on a completely different principle: creating public good for all members of the territorial community. Its activities will be aimed at minimizing costs and minimizing cost price while simultaneously increasing the quantity and quality of the benefits received by Kyiv residents: square meters of quality housing, a stable supply of heat, light, and water, accessible education, healthcare, security, and other vital services.
   This structure should consolidate all municipal resources (land, property, finances), enterprises, and local self-government bodies into a single organism controlled by the people of Kyiv. Such an approach will eliminate thousands of non-transparent municipal enterprises and allow the community to exercise direct and effective control, participate in the discussion of key decisions, and directly influence their adoption. It is this single, accountable entity, and not another municipal enterprise, that should act as the executor, customer, and controller of the completion of problematic facilities. This will ensure that resources are used in the interests of the people of Kyiv and not scattered among numerous structures where they are easily stolen.

This is the only fair way to move from an imitation of a rescue to a real solution to the problem, protecting the interests of both the defrauded investors and the entire territorial community of Kyiv.

Conclusion:

Only a radical change in approaches, including a full audit, the inevitable criminal liability of the guilty, and the creation of a transparent municipal alternative, can save not only “Kyivmiskbud” but also the community’s trust in the city authorities. This is about breaking the vicious circle where the consequences of corruption and inefficient management are systematically shifted onto the shoulders of taxpayers. Without this, trust will be finally destroyed, and any future initiatives of the authorities will be perceived through the prism of deep skepticism and suspicion.

The territorial community of Kyiv is not a bottomless wallet to cover others’ crimes and miscalculations. It is a subject of law that should be at the center of any decision concerning public funds and urban space. Every hryvnia directed to saving non-transparent structures is a hryvnia taken from schools, hospitals, and critical infrastructure, the safety of which concerns every resident. Returning the community to its rightful place in the management of the city is the only way to sustainable development and the restoration of elementary justice.