How investors who were clients of Freedom Finance can get their money back?
Sanctions often have an “iceberg” effect. The application of restrictions to one person has severe consequences for third parties.
The tip of the iceberg was the imposition of sanctions on the Ukrainian representative of Freedom Finance. The hidden consequence was the blocking of several billion in funds of the company’s Ukrainian clients.
On the one hand, the sanctions were imposed for 5 years and will expire in 2027. On the other hand, the state practices re-imposing sanctions after their expiration, and inflation is clearly not in the interests of investors.
This course is obviously unfair to Ukrainian investors. In this regard, ways to return funds to Freedom Finance clients should be sought now.
Who’s Freedom Finance?
Freedom Finance is an international company that provides brokerage services in the United States and Europe, including Ukraine and Asia. The company also operated in russia, however, in October 2022, it announced its intention to sell its russian business.
The founder of Freedom Finance is Timur Turlov, a Kazakhstani entrepreneur of Russian origin.
In Ukraine, Freedom Finance is represented by Freedom Finance Ukraine LLC.
According to open sources, there were 12.7 thousand investors in Ukraine with a total capital of UAH 3.5 billion.
Freedom is not such a “freedom” after all
In October 2022, personal sanctions were imposed on Freedom Finance Ukraine LLC and its beneficiary Turlov.
The grounds for the sanctions have not been officially announced, but according to media reports, they are a consequence of the company’s Russian roots.
The sanctions include “blocking of assets” and “suspension of economic and financial obligations”.
The restrictions were imposed for 5 years. However, after the expiration of this period, the sanctions may be re-imposed.
The peculiarity of applying sanctions to a financial company is that the assets of both the company and its clients are blocked. In fact, every investor becomes a “sanctioned” person.
In this regard, the funds of thousands of Ukrainian Freedom clients were sanctioned in one line on the NSDC list.
Until June 2025, Freedom Finance Ukraine will have an interim manager (analogous to a temporary administration). One of his tasks was to find ways to recover client assets. However, no such solutions have been found in the six months since the interim manager took over.
There is a chance to get the money back. It is a matter of time and the desire of the state
The NSSMC is actively discussing the return of funds to investors. In particular, the option of liquidating Freedom and returning funds to investors is being considered. However, the NSSMC does not show interest in resolving the issue quickly.
The state has several instruments independent of the NSSMC that protect the rights of Freedom investors in the current legislative regulation.
- Amendments to sanctions
The Law on Sanctions allows for amendments to the applied restrictions.
The relevant decision must be made by the National Security and Defense Council and enacted by the President.
The changes should include a new version of the sanctions imposed on Freedom Finance. To protect the rights of investors, it is enough to limit the sanctions to “blocking assets” and “suspension of economic and financial obligations.” These sanctions should be applied “except for financial transactions in favor of investors in financial instruments”.
The advantage of this decision is that it can be implemented here and now. The procedure for amending sanctions is already used in Ukrainian sanctions practice.
For example, in June 2024, the NSDC amended sanctions against beneficiaries of mining companies. Previously, all subsoil use permits were suspended, but the new version of the sanctions limited the effect to specific permits. This decision unblocked the operation of certain deposits.
The disadvantage of this solution in the case of Freedom is the lack of control over investors. Freedom’s accounts may contain investments of entities associated with the aggressor. Unblocking such funds will allow them to be transferred outside Ukraine and used against our country.
- Permission to receive funds from Freedom
In 2024, the Ministry of Justice, together with the Institute of Legislative Ideas, proposed to introduce special permits to carry out actions prohibited by sanctions.
We published an analysis of the draft law earlier.
Such a permit is proposed to be issued to an individual, a legal entity, or directly to a sanctioned entity.
In the case of Freedom, the permit should provide for the unblocking of the investment asset and consent to a financial transaction to transfer funds to the investor’s account.
At the same time, the question of who should issue such a permit, on what grounds and under what conditions remains open. The draft law proposes to authorize the Cabinet of Ministers to determine the relevant procedure.
Issuing 12 thousand permits will obviously require significant resources, including time. Therefore, the best solution would be to issue permits for certain types of sanctioned actions. For example, by category of entity or amount of investment.
Among the advantages, a “permissive” return of funds would make it impossible to unblock Russian investments. This would be under the control of the authority authorized to issue permits.
However, the timing of the introduction of permits in Ukraine is still unknown. The relevant draft law has not yet been registered in the Verkhovna Rada.
Consideration of the draft law and adoption of the procedure by the Cabinet of Ministers may take from several months to several years. During this time, billions of hryvnias would lose their value for investors under the influence of inflation.
The problem of Ukrainian investors in Freedom arose due to the reckless application of sanctions by the state. Therefore, the state should proactively defend the rights of the company’s clients.
The case of Freedom demonstrates the need for strict adherence to the principles of sanctions and a consistent approach to decision-making. Blocking UAH 3.5 billion of Ukrainians is a dubious purpose of sanctions.
For Ekonomichna Pravda.
