Operation Midas revealed a systemic management failure at Energoatom, one of Ukraine’s largest state companies. But things can get much, much worse. 

How the government responds will determine if this scandal only affects the nuclear operator, or every other state company, destroying years of hard-won reforms that tried to lift Ukraine out of its Soviet past. For now, the government is not off to a great start. 

Prime Minister Yuliia Svyrydenko announced three decisions after news of the corruption scandal broke:

• Energoatom’s supervisory board was fired without following the legal framework
• The Ministry of Economy was told to find new board members in just a week
• An urgent audit of Energoatom was launched

However, it later emerged that another decision was adopted on the same day, without being announced — effectively nullifying independent performance evaluation for supervisory boards of all strategic state-owned enterprises (SOEs), not just Energoatom.

These steps, in combination, raise serious concerns that a reform rollback is possible. If that happens, it can lead to more political meddling at SOEs, paving the way for a new wave of systemic scandals in the future. 

This can weaken the greatest pillars of Ukraine’s economy during a time of war, compromise the country’s future recovery, erode its integration into the EU, and make it more like Russia, something that thousands of volunteers fought tooth and nail to prevent. 

Corporate governance reform is meant to fix Ukraine’s post-Soviet dysfunction

Energoatom runs the nuclear plants and is responsible for more than half of the country’s power generation. 

Like other strategic SOEs, Energoatom went through corporate governance reform in 2023 and 2024, to establish efficiency and transparency. Part of this reform involved creating a supervisory board — the first one Energoatom had in history. 

This was supposed to break Ukraine's Soviet legacy of state enterprises where ministers acted as owner, manager, and controller simultaneously — a system where only 15% of Ukraine's 3,100 state enterprises turned a profit, while the rest accumulated $16.7 billion in debt between 2018 and 2023. 

The 2024 reform, a prerequisite for EU membership and IMF funding, aimed to replace political appointments and extraction schemes with independent boards selected through transparent competition. It was meant to finally complete what reformers started in 2014.

The failures of Energoatom’s supervisory board

For Energoatom, proving Ukraine could manage strategic assets to OECD standards is essential for attracting the billions in reconstruction investment the country desperately needs.

In theory, the system should work as follows: the state sets strategic goals and appoints a supervisory board to ensure their implementation. The board hires and oversees management. The state then evaluates whether the board has fulfilled its mandate.

In practice, however, the board’s independence was compromised from the start. 

Despite official statements denying political interference, real events suggested otherwise. A six-month delay in signing contracts with newly elected board members — which prevented the board from starting its work — led to the resignation of independent member Timothy Stone. 

As a result, the supervisory board never obtained the legally required majority of independent members. And it subsequently failed in its responsibilities: 

• Controlling management activities: Regular reporting, risk assessment, and personnel decisions are basic tools the board should have applied.
• Establishing an effective internal control system: Compliance, risk management, and internal audit mechanisms at Energoatom proved ineffective. For example, if the whistleblowing mechanism had functioned properly, the so-called “bar gate scheme,” in which officials stole $100M of state money through kickbacks, could likely have been detected much earlier.
• Ensuring transparency: The suspension of financial and non-financial reporting during wartime — although justified as protection from external threats — effectively facilitated internal abuse by corrupt officials.

Members of supervisory boards at SOEs must fully understand their fiduciary duties.

If a board cannot explain what it has done over the past year to prevent or detect corruption schemes in a company long associated with scandals — and provides only vague general statements — this indicates a lack of due care.

As such, the Ministry of Economy’s position that the supervisory board “was not involved” in the actions under investigation seems unclear. While board members were not beneficiaries or perpetrators of the corrupt schemes, their core responsibility was precisely to ensure such schemes could not occur.

Even more contradictory is the Ministry’s claim that this board “helped establish modern corporate governance processes.” If large-scale corruption was allowed to flourish, it is difficult to describe the system as modern or effective.

A comparison with the banking sector is instructive: managers and board members whose banks collapse lose their impeccable business reputation and are barred from similar positions. At Energoatom, however, the board under whose watch corruption thrived was essentially thanked for “building modern corporate governance.”

Throwing the baby out with the bathwater

One of the government’s first reactions to the scandal was to prematurely terminate the powers of this board. 

At first glance, this may seem logical: the board is the key element of the corporate governance system and is accountable to the state as the owner.

However, the way the government went about it — firing from the hip while ignoring legal procedures —may suggest that it’s more interested in sweeping the problem under the rug than solving it.

1. The premature dismissal of the board

The Law On the Management of State Property Objects contains an exhaustive list of grounds for early dismissal of supervisory board members.

Nothing on that list says you can fire the board based on a subjective assessment of ineffectiveness. 

The decision must rely on a formalized performance evaluation. Since no proper evaluation was conducted, the government likely lacked legal grounds for the dismissal.

Even the government’s amendments adopted on 11 November, allowing evaluations to be conducted solely by Energoatom’s owner (the Cabinet of Ministers through the Ministry of Economy) — without independent consultants — do not eliminate the requirement to actually perform the evaluation.

Under the legally-mandated procedure:

• All board members must complete questionnaires
• Company data must be analyzed
• Each element within the scope of evaluation must be given a score
• An action plan to fill identified gaps must be prepared
• Board members must be allowed to give their explanations

None of this could reasonably have been completed in a single day. The absence of a published evaluation report, which is explicitly required by law, further indicates that the evaluation did not take place.

If this violation of a core reform safeguard is ignored, protection of SOE supervisory boards from political interference will collapse. If Energoatom’s board can be dismissed in this manner, any SOE board could be dismissed next, regardless of objective justification.

2. Appointment of a new supervisory board in one week

The Ministry of Economy stated that, in coordination with G7 partners, it would propose a new board composition within a week.

However, the procedures established by law and Cabinet resolutions 142, 143, and 777 require:

• a formal decision to launch the selection;
• competitive selection of a recruiter;
• publication of candidate requirements;
• acceptance and evaluation of applications;
• shortlisting by a nomination committee;
• Cabinet approval.

This process typically takes at least three months. Completing it in seven days is not realistic under current rules.

Some stages may be accelerated in exceptional circumstances, but bypassing transparency and competition is not flexibility — it is regression. Transparent, merit-based selection is a cornerstone of sound corporate governance. Any informal or opaque approach will further erode trust.

The inconsistency is striking: the government can amend resolutions overnight when it seeks to weaken transparency (as with the evaluation procedure), yet has failed for months to approve reforms aimed at strengthening selection rules — despite these being legal obligations and long-overdue IMF benchmarks. 

This explains why official claims of “commitment to reform” now face skepticism.

3. Dismantling the supervisory board performance evaluation mechanism

A key win of the 2024 reform was the introduction of regular performance evaluations of SOE supervisory boards. The law required the Cabinet to define procedures and specify cases where an independent consultant is mandatory.

The core principle was clear: board effectiveness must be assessed based on objective evaluation, not political judgment.

However, on 11 November, the government decided that, during martial law, evaluations will be conducted solely by the ministry that owns the SOE. 

This enables ministries to unilaterally determine supervisory board effectiveness without independent oversight.

This marks a return to direct state control over these companies. Any supervisory board can now be dismissed at a ministry’s discretion — a practice common before the 2024 reform.

Also, the legality of the amendment is highly questionable. The 2024 reform law clearly defines the list of exceptions allowed during martial law — and none of them involve evaluating a supervisory board’s performance.

Reform on the brink

Corporate governance cannot be strengthened by methods that undermine its core principles: procedural integrity, transparency, and independence.

Operation Midas demonstrated that Ukraine still operates within a framework of simulated corporate governance.

The reform will become real only when:

• Supervisory boards are held personally accountable for their actions and inaction;
• Transparency and accountability of SOEs and managerial decisions are ensured;
• The government refrains from political interference in corporate processes.

Violating established rules in pursuit of a “quick result” is not reform — it is dismantlement. Unless these decisions are reversed, Operation Midas will be only the first in many similar scandals to come. 

Oleksandr Lysenko

Oleksandr Lysenko is an independent corporate governance and legal consultant, who co-authored the 2024 corporate governance reform for Ukraine's state-owned enterprises.

Ukraine's Security Service “Alpha” special forces report they have carried out a series of precision strikes on Russian positions in temporarily occupied territory. As a result, logistics hubs, personnel, and equipment have been targeted. 

Silence on the approaches, explosions at night 

“The night strikes were carried out using FP-2 unmanned aerial vehicles with 105-kg warheads,” said the agency. 

The strikes struck key logistics nodes and concentrations of equipment used to reallocate Russian forces.

What does the FP-2 mean for defense?

The new attack drone FP-2, developed by the Ukrainian company Fire Point and unveiled in early September, is designed to engage frontline targets.

Structurally similar to the FP-1, the FP-2’s warhead has been increased. The new vehicle’s flight range is 200 km compared with 1,400 km for its predecessor.

The cost of one FP-2 is approximately $55,000, which is a relatively inexpensive yet technologically powerful option.

Night strikes as a signal to the enemy

The FP-2 demonstration highlights how relatively affordable high-tech solutions are changing logistics and tactics on the battlefield. This is important for arms producers seeking effective defensive means.

Ukraine reminds that it is ready to use available tools to neutralize threats, and that Ukraine’s defensive capabilities continue to evolve.

Ukrainian soldiers spent 400 million hryvnia ($9.6 million) daily on online casinos in 2023—more than the entire nation donated to its Armed Forces that year.

Junior Sergeant Pavlo Petrychenko saw the crisis firsthand. His March 2024 petition warning that soldiers were pawning drones and thermal imagers to cover gambling debts gathered 25,000 signatures in a single day.

Petrychenko died defending Donetsk Oblast on 15 April 2024—two weeks after registering his appeal. President Zelenskyy posthumously awarded him the title of Hero of Ukraine and enacted restrictions on military gambling.

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Ukraine bans online casinos for soldiers amid gambling addiction crisis

Nine months later, Ukraine still can’t enforce those restrictions. The crisis threatens national security, creates intelligence vulnerabilities, and puts Ukraine’s post-war recovery at risk as debt-trapped veterans return to civilian life.

When presidential decrees hit legal walls

Zelenskyy’s April 2024 decree banned military personnel from gambling sites, but military commanders have no legal authority to add soldiers to Ukraine’s registry, restricting gambling access. Ivan Rudiy, head of the Commission for Regulation of Gambling and Lotteries (KRAIL), told Glavcom the order contains a fatal flaw.

As of 24 July 2024, Ukraine’s self-restriction registry contained 8,257 people—99% who voluntarily banned themselves, with 81% choosing the maximum three-year restriction.

The registry grew sixfold after KRAIL launched an online application form in July 2023, jumping from 367 registrations in the first half of 2023 to 2,200 in the second half.

But voluntary self-restriction can’t address soldiers whose addiction has progressed beyond self-awareness.

National security meets personal catastrophe

“Gambling takes advantage of this vulnerability by deliberately targeting military personnel, using Armed Forces symbols in online casinos,” Petrychenko wrote in his petition. He warned that Russian online casinos accessing Ukrainian soldiers’ personal data created national security threats alongside financial devastation.

One Border Guard fighter told Kyiv Post that systematic gamblers comprised “up to 10 percent” of his unit, though participation increased during major sporting events. Ivan Zadontsev, press officer for the Aidar battalion, told AFP about one soldier who won 2.5 million hryvnia ($60,000) only to gamble it away immediately.

Military psychologist Andrii Kozinchuk noted that frontline troops earning substantially above civilian wages face particular vulnerability to gambling’s appeal. “You feel as if you’ve discovered a new source of income and will continue to earn money,” he explained regarding the serotonin rush that drives addiction.

The addiction follows soldiers into recovery. Iryna Sysoyenko, president of the All-Ukrainian Association of Physical Medicine, Rehabilitation and Balneology, wrote in Ukrainska Pravda that rehabilitation centers see soldiers continuing to gamble during physical recovery.

Racing to build an infrastructure

KRAIL blocked nearly 2,000 unlicensed gambling websites in 2024 and negotiated with Meta and Apple to remove gambling advertisements and unauthorized apps. The regulator wants to conduct a national sociological study targeting military personnel and veterans as respondents. Still, Rudiy acknowledged that “conducting such research is significantly complicated by Russia’s full-scale armed aggression.”

Against this industrial-scale crisis, volunteers distributed 4,000 financial literacy books to military units in 2025. Soldier and theater director Kyrylo Lukash, who coordinates the Cultural Forces initiative built on their 2023 “Book to the Front” program, explained that service members themselves selected titles, including “Thinking, Fast and Slow” by Daniel Kahneman and “The Richest Man in Babylon” by George Clason.

“Soldiers with call signs Banker, Financier and similar chose the books,” Lukash said. The initiative operates through gatherings of 10-20 people with lectures and performances, followed by individual conversations.

Sysoyenko emphasized the urgency of developing proper treatment: “We must research international experience, develop appropriate methods and protocols, engage specialists, and most importantly—adapt methods to our needs, our reality, and our people.” She noted that in the United States, gambling disorder prevalence among veterans reaches 10.7%.

Stakes beyond individual soldiers

Veterans carrying gambling debt into civilian life threaten Ukraine’s post-war economic recovery. This is the threat Petrychenko died trying to prevent: debt-trapped soldiers become vulnerable to Russian intelligence exploitation, turning personal financial crises into national security liabilities.

Petrychenko’s warning received 25,000 signatures. The response was 4,000 books—a well-meant but tiny gesture against a crisis in which soldiers gamble away more than their nation can donate to defend itself.