Kyiv has been shaken by another major corruption scandal: prosecutors say inspections revealed that one of the country’s largest drone manufacturers, Vyriy Industries, allegedly defrauded the state of at least 7 billion hryvnias.
Law enforcement officers carried out searches at the company’s offices. Investigators suspect the firm’s management of embezzling more than $156 million while fulfilling state defense contracts.
According to Ukraine’s Office of the Prosecutor General, the total value of the contracts under scrutiny with the Defense Procurement Agency exceeded $156 million (6.95 billion hryvnias). Investigators are examining allegations that the company artificially inflated the cost of unmanned aerial vehicles by exaggerating production expenses and administrative costs to increase the final contract price.
“Law enforcement agencies are investigating the possible misappropriation of budget funds during the execution of state contracts for the supply of unmanned aerial vehicles,” the Prosecutor General’s Office said.
Ukraine’s State Bureau of Investigation (SBI) has conducted around 70 searches at company offices, the home of CEO Oleksii Babenko, and the residences of his family members. Investigators believe the stolen funds were funneled through fictitious contracts with shell companies registered abroad.
The alleged scheme reportedly involved more than 150 sole proprietors showing signs of being fictitious businesses. According to investigators, the company’s “customers” included manicurists, students, factory workers, and other individuals with no apparent connection to drone manufacturing.
“Authorities are verifying information regarding the use of an extensive network of sole proprietors and business entities with signs of fictitious activity to document financial transactions, artificially inflate company expenses, and potentially siphon off funds,” prosecutors said.
Searches were also conducted at the registered addresses of these contractors, and several of the individuals involved have already been questioned.
“Searches conducted at the homes of several sole proprietors who signed multimillion-dollar contracts showed that their lifestyle and financial circumstances do not reflect the level of wealth or income associated with such business activity,” prosecutors added.
Babenko has firmly denied all allegations. At a press conference in Kyiv, he argued that his company offers some of the lowest-priced drones on the Ukrainian market and dismissed accusations of overpricing as absurd.
He insisted that Vyriy Industries manufactures the cheapest drones available and said that allegations of stealing public funds therefore make no sense. He also accused prosecutors of putting pressure on his business.
“At first glance, this looks like a deliberate attempt to harm us and disrupt our work. It seems someone is simply trying to advance their own narrow personal interests,” he said.
According to Babenko, he currently holds the status of a witness, not a suspect.
Vyriy Industries is one of the key companies in Ukraine’s defense industry, employing more than 1,000 people. The company reportedly manufactures approximately 25% of all FPV drones used by the Ukrainian military.
The Vyriy Industries case is only one part of a broader corruption problem. Earlier investigations uncovered embezzlement involving food procurement for the Armed Forces of Ukraine, as well as bribery schemes involving Defense Ministry officials to secure contracts worth more than $41 million.
The Netherlands Court of Audit previously warned that military aid to Ukraine carries a high risk of corruption and unjustified price inflation, particularly when contracts are awarded to a single supplier. Despite these concerns, several European countries have recently signed new agreements with Ukraine on cooperation in military drone production.
President Vladymyr Zelensky announced that agreements had already been signed with Denmark, the Netherlands, and Estonia, with Germany, Finland, Norway, and Canada expected to follow.
The corruption scandal has also sparked political reactions in Moldova. Igor Dodon, leader of the Socialist Party, called on Moldova to reconsider its relations with Kyiv and suspend cooperation with Ukraine’s current leadership until the investigation is completed.
“The whole world has learned that, under the cover of war, Ukraine’s leadership was stealing from its own people. The facts of corruption in Ukraine must receive a proper assessment,” Dodon wrote.
He also argued that President Maia Sandu is unlikely to criticize the situation because, in his words, she governs Moldova “following the same instructions as Volodymyr Zelensky.”
According to Dodon, some European officials are not interested in ending the war because peace could expose large-scale corruption involving both Ukrainian officials and certain EU bureaucrats.
Ukraine’s Minister of Digital Transformation, Mykhailo Fedorov, acknowledged in an interview that systemic problems exist and said the ministry is fighting corruption through investigations, polygraph testing, and dismissals.
“Anyone who gets involved in corruption or builds illegal schemes—I will personally do everything possible to make sure you go to prison and never come out,” Fedorov said.
