KYIV - Ukrainian President Volodymyr Zelenskiy's former right-hand man was taken into custody on Thursday on money-laundering charges, part of a fight against graft that is fuelling wartime political tensions.

Investigators on Monday had named Andriy Yermak as an official suspect in a sprawling, multi-episode case that has gripped Ukraine for months and stoked anger among a war-battered population at high-level corruption.

His arrest represents the deepest authorities have dug into the president's inner circle in their bid to weed out graft as Kyiv strives for membership in the European Union.

The anti-corruption court also set bail at 140 million hryvnias ($3.2 million), which would allow Yermak - who served as Zelenskiy's chief of staff and has denied the allegations against him - to be released pending a final ruling in his case.

"I don't have that kind of money, and my lawyer will now work with friends and acquaintances (to raise the money for bail)," Yermak told reporters after the court's decision.

"My legal team will file an appeal. We will use every legal avenue to seek justice and the truth."

Anti-corruption agencies accuse Yermak of participating in a criminal group that laundered around $10.5 million through an elite housing development outside the capital Kyiv.

HIGH-PROFILE OPERATION

The case is part of a broader operation dubbed "Midas", unveiled last November, whose chief suspect is Zelenskiy's former business partner Timur Mindich.

Authorities accused Mindich of leading a $100 million kickback scheme in the energy sector - charges that roiled Ukraine at a critical moment in the war with Russia. He has denied wrongdoing and fled to Israel.

The case against Yermak also ties Mindich and another Zelenskiy ally, former deputy prime minister Oleksiy Chernyshov, in the Kyiv-area laundering operation. Chernyshov, who is facing charges in a separate episode, has also denied wrongdoing.

The scandal had resurfaced even before the charges against Yermak were unveiled, after Ukrainian media and opposition lawmakers leaked what they described as transcripts from a wiretap of Mindich discussing the Kyiv development.

In one fragment, Mindich and an unidentified woman are purportedly heard discussing properties, as well as people named "Andriy" and "Vova" - the latter an informal short form of the name "Volodymyr".

Reuters could not independently verify the transcripts, and there was no evidence implicating Zelenskiy. The president's office did not respond to an earlier request for comment on the matter, and his communications adviser said this week it was too early to comment on the Yermak case.

The charges against Yermak are not likely to pose an immediate threat to the president, who cannot be legally prosecuted while in office, but could lead to reputational damage if he runs for re-election after the war, some analysts say.

EX-POWER BROKER

Yermak was widely seen as Ukraine's second most powerful person after Zelenskiy until his resignation last year, part of a government shake-up aimed at restoring trust in the presidential office.

Wielding outsize influence across much of Ukrainian politics despite holding an unelected position, the former film producer frequently appeared at the president's side at public events,

He had also been Kyiv's lead negotiator in U.S.-backed peace talks with Russia.

Yermak's ouster cast new focus on what critics have described as excessive power concentrated in the presidential administration and based primarily on loyalty to Zelenskiy, who has dismissed suggestions of misrule.

"This is all a result of...an unwillingness to count on professionals and broaden the circle (of candidates) as should be done especially during wartime," opposition lawmaker Iryna Herashchenko said on Ukrainian television late on Wednesday.

($1 = 43.89 hryvnias)

(Reporting by Pavel Polityuk and Dan Peleschuk; Editing by Daniel Flynn, Sharon Singleton and Toby Chopra)

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