As Russian soldiers attacked trench lines in eastern Ukraine in 2024, Ukrainian artillery crews opened fire. But the rounds, instead of exploding near the advancing troops, flopped out of launch tubes or landed with quiet thumps, kicking up puffs of dust.

A Ukrainian arms factory, it turned out, had supplied the military with thousands of defective mortar rounds. A burly weapons factory boss, Leonid Shyman, would eventually be arrested and charged in one of the war’s most public examples of defense-industry fraud.

But even as the officials noticed that weapons were arriving faulty, government audits obtained by The New York Times show, Ukraine’s Defense Procurement Agency continued to award Mr. Shyman’s factory new contracts.

The case reflects a persistent phenomenon of the war in Ukraine. Seven of Ukraine’s top 10 military contractors won new business despite open criminal investigations for fraud, failures to deliver on earlier deals or the arrest of chief executives for corruption, according to the government audits obtained by The Times, court records and Ukrainian news accounts.

Mr. Shyman, for example, had been the subject of multiple investigations by anti-corruption agencies, including for embezzlement and fraud, when he won that first mortar contract. The government awarded the $280 million deal while he was out on bail on corruption charges.

Confidential reviews by the State Audit Service and an internal Ministry of Defense auditing department reveal a military procurement system riddled with mismanagement. Warning signs go unheeded, the records show, and there are seldom consequences for overcharging or failing to deliver.

Companies won contracts without demonstrating that they could supply the weapons, or without licenses to deliver them. Auditors identified 18 companies that signed deals despite defaulting on previous agreements. Six of those companies failed to fulfill a single contract.

Military contractors around the globe, including the world’s richest arms dealer as well as Ukrainian and American companies, have gotten wealthy through this system.

The internal government audits showed that in 2024 alone, Ukraine lost about $1.2 billion to fraud, waste and mismanagement.

Those losses, which have not been made public, piled up even as President Volodymyr Zelensky appealed to allies for more weaponry and financial aid.

“The army doesn’t get what it needs and the budget shrinks from non-deliveries and overpayment,” Tamerlan Vahabov, a former adviser to Ukraine’s Defense Procurement Agency, said in an interview. “As a result, we don’t have money to order more weapons. And we don’t have the quantity of ammunition we need. And it is a recurring pattern.”

About $126 million was lost by bypassing lower bids and overpaying for weapons. Contracts were awarded without legal justification, the auditors said. In one case, companies remain locked in a fight over what happened to at least $100 million in prepayments for a deal that fell apart.

The audits obtained by The Times cover the years 2024 and 2025. It is unclear what, if anything, the Defense Procurement Agency did in response to the audits. Because they are classified, they have never been subject to public scrutiny.

The director of the procurement agency, Arsen Zhumadilov, declined a request to comment. Mr. Zhumadilov resigned and left the position on Monday.

During nearly five years of combat, Ukraine’s government has stayed intact as its military fought against the odds. Soldiers resisted Russia’s larger army and reinvented the battlefield with drones and robots. The government rode out the loss of support from its largest ally, the United States, by winning financial backing in Europe.

But the same procurement process that kept Ukraine in the fight and enabled the drone revolution has become a vulnerability in itself, one that has shaken domestic politics. A former defense minister, Mykhailo Fedorov, tried to overhaul the system and said defense contractors ran him out of office for doing so.

“There is a lot of corruption,” Mr. Fedorov said after his firing. His ouster sparked the largest street protests since the war began. Mr. Zelensky has said he fired Mr. Fedorov because of his clashes with military leaders.

Mr. Zelensky has failed to clean up the procurement system, and the problems have reached into his inner circle. Last year, corruption investigators secretly recorded his former business partner urging officials to buy armored vests that had failed safety tests. Investigators say the man fled Ukraine amid the investigation. Mr. Zelensky has not been implicated and has said that he supports the investigation.

The government audits amount to an autopsy of the military contracting process. And they offer detailed looks at the players, at home and abroad, who have profited from the war.

“Anything that isn’t nailed down in Ukraine will be stolen,” said James Wasserstrom, an American anticorruption expert who has tried throughout the war to draw attention to defense industry fraud. “This has been a longstanding tradition.”

Failure. Multimillion-Dollar Contracts. And More Failure.

The mortar failures were a high-profile battlefield embarrassment.

Censor.net, a Ukrainian news outlet, broke the story. Parliament investigated and in April 2025 the police arrested Mr. Shyman, the factory director. He was charged with fraud worth about $68 million — the cost of inspecting and replacing tens of thousands of faulty mortars.

A court later ruled that Mr. Shyman’s company, Pavlohrad Chemical Plant, had sold the army 233,000 unusable mortar rounds, many with flawed fuses or gunpowder propellant, according to court records provided by the Ukrainian data company YouControl.

Pavlohrad is a state-owned company but Mr. Shyman, a chemical engineer, has been its factory boss since the early 2000s. He was widely recognized as Ukraine’s king of explosives. Parliament had written his name into one law on the industry, citing him as an authority.

With his sprawling real estate portfolio, he lived large by rural Ukrainian standards. Investigators said they found that $9 million had passed through a bank account in Liechtenstein linked to Mr. Shyman’s wife.

He kept a herd of buffalo, along with deer and moose, on the factory grounds. He said it was to prove that his factory was not polluting, but anticorruption activists said it was so his executives could hunt the animals.

When auditors reviewed the company’s mortar contract, they found something odd. Pavlohrad had initially said that it lacked that capacity to fulfill the order. Then, without explanation, it restated its production abilities and the government awarded the contract.

Government auditors found no evidence that anyone had tried to verify that the factory could fill the order.

When faulty mortars began arriving, auditors said that the procurement agency “did not draw proper conclusions.” Instead, it gave Pavlohrad even more business, including the contract to supply nearly all of the military’s 122-millimeter artillery rounds in 2025.

The audits do not say who decided to give Pavlohrad the contracts or why. The company declined to comment. In August, the procurement agency’s director, Arsen Zhumadilov, resigned.

Mr. Shyman was sentenced last month to five years in prison in a separate case for orchestrating a corruption scheme to sell explosives at inflated prices.

Mr. Shyman intends to appeal that conviction and has asserted his innocence in the mortar case, his lawyer, Oleksandr Protas, said.

In the arms business, Mr. Protas said, “nothing is black and white and everything is in shades of gray.”

The World’s Richest Arms Dealer

In 2024, the Defense Procurement Agency sought bids to buy hundreds of millions of dollars’ worth of rocket artillery.

Three companies responded. One said it could supply the rockets at the equivalent of about $4,200 apiece. Another wanted $4,600. A third said the price was $5,100.

The rockets were all the same — made in the same factory, by the same company in Turkey. The only difference was the price.

The Turkish manufacturer, Arca Defense, offered the lowest bid, suggesting a sale direct from the factory.

But auditors found that the contract went to the highest bidder, a subsidiary of the Czechoslovak Group, a major Czech holding company. Rather than buy direct, the government decided to pay the Czech company to serve as an intermediary.

Auditors found “no justification for the decision.” Previous audits had warned against buying through intermediaries. The government did not follow that advice.

The decision added about $130 million to Ukraine’s bill for the rockets, according to a Times analysis of the competing bids described in the audits.

The rocket contract was one of many Ukrainian deals that have helped transform the Czechoslovak Group into a global defense powerhouse. The company went public this year, turning its 33-year-old majority owner, Michal Strnad, into the wealthiest arms manufacturer on Forbes’ billionaires list.

It was the largest-ever defense industry initial public offering. The company told investors that it benefited from a military spending “super cycle” from wars in Europe and elsewhere. In 2024, more than 40 percent of its revenue came from Ukraine-related sales.

A Czechoslovak Group spokesman, Andrej Cirtek, said bidding questions were for the government to answer. There are no accusations in the audit that the company did anything wrong. “We are not a party to other bidders’ proposals and do not have access to their commercial terms, contractual conditions or the contracting authority’s evaluation,” he wrote in an email.

Despite the auditors’ concerns, Ukraine considered contracting with the Czechoslovak Group again, this time to replace its arsenal of Kalashnikov rifles with a Czech-designed, NATO-caliber rifle model. No deal has been announced.

The company spokesman said the group was diversifying sales to European nations and the United States but that Ukraine remained an important customer.

Red Flags and an American Contractor

In another instance, records show, Ukraine plowed ahead with a complicated arms purchase despite warning signs — only to see the deal collapse.

In 2024, the Defense Procurement Agency wanted to buy Soviet-style rockets from a Serbian manufacturer. Because of Serbia’s Russia-friendly politics, Ukraine relied on a chain of intermediaries to get the rockets.

The government contracted with a Ukrainian state-owned weapons broker, Spetstechnoexport (pronounced SPETS-tek-no-export). The company had a history of unfulfilled contracts, auditors said.

Anti-corruption authorities had also publicly announced that they were investigating former company executives for possible embezzlement and money laundering, according to HACC Decided, a platform developed by Transparency International Ukraine that tracks high-profile corruption cases.

Spetstechnoexport also did not have a Serbian export license for the rockets, auditors wrote. In place of a license, the company submitted a “guarantee letter” from Ukraine’s military intelligence agency, the auditors found. Auditors said that the preferential treatment had no legal justification and came despite the company’s history of defaults.

The company did not respond to repeated messages and calls.

Spetstechnoexport subcontracted with an American weapons company, Regulus Global. The company, run by a former Merrill Lynch stockbroker, William Somerindyke Jr., had a history of supplying Ukraine’s army as well as U.S.-backed rebels in Syria. But this deal would be particularly complex.

The contract was among several between Regulus and Spetstechnoexport, worth a combined $1.7 billion, that were intended to funnel weapons to the war zone. Mr. Somerindyke, in an interview, said the partnership had delivered crucial weaponry that had benefited Ukraine’s defense and American foreign policy.

The rocket deal, though, began unraveling.

The defense minister at the time, Rustem Umerov, wanted to cut intermediaries out of Ukraine’s wartime weapons business. He asked Regulus to deal with the government procurement agency directly, effectively cutting out Spetstechnoexport, Mr. Somerindyke recalled.

The deal collapsed, and by early 2025, Spetstechnoexport had become the largest debtor to the arms purchasing agency, with more unfulfilled contracts than any other supplier, auditors found.

In the fallout, the Ukrainian government sued Spetstechnoexport for late penalties and interest. Spetstechnoexport, in turn, demanded money from Regulus.

Mr. Somerindyke said his company did nothing wrong and was merely “caught in the middle” of a Ukrainian procurement shake-up.