Leyza Florin Blanco Makes D&I North America Shortlist
We are delighted to announce Sequor Law Shareholder, Leyza B. Florin as a finalist at the Chambers Diversity & Inclusion Awards: North America 2022.
These awards celebrate the fantastic achievements of firms, companies and individuals who are furthering the advancement of diversity and inclusion across the USA and Canada. Congratulations Leyza, and thank you for your endless dedication to promote diversity and inclusion in all you do!
BVI funds linked to 1MDB fraud seek recognition in Miami
April 11, 2022
Ben Clarke
The joint liquidators of three British Virgin Islands funds that were allegedly part of a huge fraud perpetrated against Malaysian sovereign wealth fund 1MDB have sought recognition in Miami to further their investigations.
In a 5 April filing in the US Bankruptcy Court for the Southern District of Florida, the joint liquidators of SRC International (Malaysia) (SRC BVI) and two subsidiaries sought Chapter 15 recognition of their appointments in the BVI to help recover some of the billions of dollars allegedly stolen from 1MDB.
One of the joint liquidators, BVI-based Helen James of Hyperion Risk Solutions, said in court filings that the joint liquidators need to obtain discovery in the US to help with their recovery efforts and investigations into the debtors’ business activities.
Authorities have been investigating 1MDB and an entity it established in Malaysia, SRC International (SRC Malaysia), since 2015 over allegations of fraud and money laundering.
As part of the scheme, James said numerous entities and individuals formed a network to divert and distribute funds to fraudsters who diverted or siphoned off US$8.5 billion from 1MDB and SRC Malaysia, which is the parent of the three BVI funds.
According to James, most investigation attempts in Malaysia were thwarted by the Malaysian government because the country’s Prime Minister, Najib Razak, was the driving force behind the creation of 1MDB.
But Najib was removed from office in 2018 and, with other co-conspirators, was subject to criminal and civil proceedings in Malaysia and elsewhere in relation to misappropriation of 1MDB funds.
Local authorities later sought cooperation with global law enforcement agencies, including the United States Department of Justice (DOJ), which has actively investigated multiple parties and seized assets in relation to the fraud over the last six years.
Last week, a Brooklyn federal court convicted former Goldman Sachs banker Roger Ng for his role in the scandal, which saw Goldman Sachs secure bond transactions worth US$6.5 billion.
But James said the DOJ has focused its efforts on 1MDB and not SRC Malaysia, despite the latter losing about US$1.15 billion.
The joint liquidators of the three BVI funds – James, Quantuma’s Caribbean head Angela Barkhouse in the Cayman Islands, and chief executive Carl Jackson in the UK – have brought civil proceedings against other companies in multiple jurisdictions since they were appointed in July and August last year.
But James said the joint liquidators suspect there are companies and trusts related to the fraud that are yet to be uncovered.
“[T]he full extent of the fraud is unknown,” she said. “The liquidation of the debtors forms parts of an international effort to trace and recover funds misappropriated through SRC Malaysia.”
James said that throughout its existence SRC BVI has been principally used by fraudsters to misappropriate funds.
She also claimed one of the other debtors, Bright Oriande (BOL), is believed to have had no legitimate business activity and was established solely to divert funds from 1MDB and SRC Malaysia. BOL’s existence was apparently concealed from SRC Malaysia’s board.
Through their investigations, the joint liquidators have identified a series of suspicious transactions involving the three debtor companies, including over US$1 billion of funds that were transferred from SRC Malaysia to SRC BVI accounts in Hong Kong and Switzerland.
The joint liquidators suspect that some of the millions of dollars that are still unaccounted for in relation to the fraud may be in the US.
Jones said they need to obtain discovery relating to various transactions to help them trace estate assets and other entities related to the three BVI funds.
Judge Robert Mark has listed a recognition hearing for 18 May.
In the US Bankruptcy Court for the Southern District of Florida
- Judge Robert Mark
Foreign representatives of SRC International (Malaysia) et al
- Hyperion Risk Solutions
Group head of finance Helen James in the British Virgin Islands
- Quantuma
Caribbean head Angela Barkhouse in the Cayman Islands and chief executive Carl Jackson in Southampton, UK
Counsel to joint liquidators of SRC International (Malaysia) et al
- Sequor Law
Shareholder Gregory Grossman and attorney Juan Mendoza in Miami
In the British Virgin Islands Commercial Division
Joint liquidators of SRC International (Malaysia) et al
- Hyperion Risk Solutions
Group head of finance Helen James in the British Virgin Islands
- Quantuma
Caribbean head Angela Barkhouse in the Cayman Islands and chief executive Carl Jackson in Southampton, UK
Counsel to joint liquidators of SRC International (Malaysia) et al
- Emery Cooke
Partner Andrew Emery in the British Virgin Islands
To read the original article click here.
Court Takes Under Advisement Motions to Convert MatlinPatterson Cases to Chapter 7, Says Decision Turns on Whether Wind-Down of Debtors’ Businesses Counts as ‘Species of Rehabilitation’
April 8, 2022
At a hearing today in the MatlinPatterson Global Opportunities Fund debtors’ chapter 11 cases, Judge David Jones took under advisement the chapter 7 conversion motions filed by the foreign representative in the chapter 15 case of Varig Logistica SA, or VarigLog, and litigation plaintiff Gol Linhas Aéreas SA, referred to by its predecessor name, VRG. Judge Jones informed the parties that he would issue a decision on the conversion motions in the near term.
HJDK Aerospacial S/A, which has asserted a $17.5 million claim against the debtors for failure of a portfolio company to repay certain loans in Brazilian civil courts, had also filed a statement in support of the conversion motion. Debtors’ counsel disputed the amount of HJDK’s claim at today’s hearing, saying that HJDK has only a $4.5 million claim.
Judge Jones opened the hearing by informing the parties that his primary focus in considering the motions was whether the debtors had a “reasonable likelihood of rehabilitation” under the relevant provision of the Bankruptcy Code. Given the nature of the debtors’ business as investment vehicles for private equity investors, Judge Jones questioned whether using chapter 11 to wind down the investment vehicles by “clearing” the foreign litigation claims order to make payouts to investors and otherwise implement their business model was a “species of rehabilitation.”
Judge Jones also said he would take into consideration whether staying in chapter 11 would result in a “substantial or continuing loss to or diminution” of the debtors’ estates. Judge Jones commented that it was “hard to see” how the administrative burn rate in the cases did not constitute some form of diminution, given the absence of revenues coming into the estates.
Gregory Grossman of Sequor Law, counsel for the VarigLog foreign representative, said that the chapter 11 cases amounted to a “preplanned dissolution” of the debtors, and although that might be part of the debtors’ business model, this could not constitute a “rehabilitation” under the Bankruptcy Code. Grossman argued that treating such a preplanned dissolution as a rehabilitation under the Code would lead to “mischief” because companies could, prior to filing for chapter 11, modify their corporate governance documents to require dissolution by a date certain in order to pre-emptively defeat chapter 7 conversion motions.
Tyler Robinson of Simpson Thacher, counsel for the debtors, argued that the rehabilitative purpose of filing the chapter 11 cases is to carry out the “intended purpose” of the debtors’ businesses, which “first and foremost” is to return capital to their investors. Robinson explained that the foreign litigation claimants had frustrated those efforts, ultimately causing the debtors to file the chapter 11 cases. Robinson said that in order to maximize the value of the estates, the debtors needed a “centralized process” for determining which parties held valid claims in order to ratably distribute estate assets.
Robinson warned that it would be a “dangerous proposition” for the court to find that private equity funds and hedge funds should not be able to use chapter 11 to wind down their affairs. Robinson also argued that U.S. Supreme Court precedent supports the proposition that liquidation is an appropriate use of the chapter 11 process and that other courts have found a confirmable liquidating plan to be sufficiently rehabilitative to defeat a motion to convert.
Arthur Steinberg of King & Spalding, counsel for VRG, argued that the debtors’ prepetition conduct justified conversion. Steinberg alleged that the debtors had covertly collateralized all their assets in favor of a nondebtor insider and transferred assets out of the estates prior to filing. Steinberg added that the debtors had no assets to liquidate, no revenue, no employees and “no public interest to protect.” According to Steinberg, the estates needed an estate fiduciary who is not “fronting for equity in the case” and that installing a chapter 7 trustee would cure the issue of “faithless fiduciaries” and satisfy the need for an independent investigator.
Ralph E. Preite of Koutsoudakis & Iakovou, counsel to HJDK, told the court that after a decision by a Brazilian appellate court entered on Nov. 19, 2021, the appeals process had been exhausted and that the claim was therefore “final.”
Elizabeth Curran of Schulte Roth & Zabel, conflicts counsel for the debtors, disagreed with Preite’s view that the litigation was over. According to Curran, the November 2021 decision related to a jurisdictional argument, and an appeal of the “full merits” of the matter is still pending. Curran added that there were still at least two additional levels of appeals available to the debtors in the Brazilian courts.
To read the original article click here.
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