Chilean liquidator in alleged Ponzi case recognised in Australia

By Douglas Thomson

An Australian court has become the latest to recognise Chilean liquidation proceedings in what is alleged to be the South American state’s first major Ponzi scheme dismantling, following courts in the US, UK and Isle of Man.

Justice Jacqueline Gleeson at the Federal Court of Australia’s New South Wales registry in Sydney recognised CP Legal partner Carlos Parada Abate as liquidator and foreign representative of the estate of Chilean businessman Alberto Chang Rajii, under Australia’s Cross-Border Insolvency Act in a ruling on 29 January.

She also recognised proceedings to liquidate Chang’s assets before the 15^th Civil Court of Santiago as a foreign main proceeding under the Australia’s embodiment of the UNCITRAL Model Law. The court followed up with a notice to creditors on 2 February.

The recognitions follow a trio of similar decisions by courts in Florida, London and the Isle of Man over the course of September. The US Bankruptcy Court for the Southern District of Florida has also granted Chapter 15 recognition of separate Chilean proceedings liquidating Chang’s investment vehicle Onix, a company he co-founded with his mother in 2009.

Chang is accused of using Onix to defraud investors through a set of promissory notes guaranteed by what was in fact another Chang company, Grupo Arcano.

The US Securities and Exchange Committee has accused him of manufacturing an identity as an award-winning angel investor, holding himself out as an early Google financier with an MBA from Stanford University, who falsely told investors their money would be put into Silicon Valley companies like Uber and Snapchat.

Liquidator Parada has said in court filings that in fact Chang only invested a small part of the funds, using them to fund a lavish lifestyle for himself instead.

Onix went into compulsory liquidation in May 2016 after it defaulted on its liabilities to a Chilean creditor, with the Santiago court appointing Parada as its liquidator. The company had over US$120 million in liabilities to over 1,000 creditors at the time of its liquidation.

A year later, Chiang’s own estate was placed in compulsory liquidation by the 15^th Civil Court of Santiago and Parada was appointed to oversee this case too.

Chang is now facing charges in Chile of fraud, money laundering and operating without a valid licence. He left Chile for Malta the month before Onix’s liquidation and although he was arrested there in December 2016, the Maltese courts have refused Chile’s request for his extradition. Chile has appealed that ruling.

In a service ruling in December, the Australian court described Chang’s current whereabouts as unknown, though he did then appear at a hearing relating to his extradition from Malta on 24 January. The court said he would be served through his personal email address and his Chilean legal counsel.

Parada was represented in the Australian proceedings by Sydney firm Arnold Bloch Leibler, and the hearings were attended by Sequor Law partner Edward Davis from Miami, his US counsel.

Davis says, “We are very happy to have obtained, along with local counsel, additional recognition for Mr Parada in Australia which will allow him to secure real estate, bank accounts and artwork that are believed to be worth more than AU$5 million [US$4 million] in value.”

Chang’s alleged personal spending on properties in Australia, the British Virgin Islands, Miami and London has instigated the global round of recognition proceedings for his Chilean liquidation.

Chang’s property on the territory’s Moskito Island was partially destroyed last year by Hurricane Irma. The asset is nevertheless among those in the territory being pursued by a companion BVI liquidation with Grant Thornton as liquidator and Parada as its largest creditor, as the BVI does not permit the recognition of foreign liquidators.

In the Federal Court of Australia

Bench

• Justice Jacqueline Gleeson

Counsel to Carlos Parada Abate (liquidator and foreign representative)

• Arnold Bloch Leibler

In the High Court of Justice of England and Wales, Chancery Division

Counsel to Carlos Abate Parada (liquidator and foreign respresentative)

• PCB Litigation

Partner Jon Felce in London

In the United States Bankruptcy Court for the Southern District of Florida

In re: Alberto Samuel Chang Rajii

• Judge Laurel Isicoff

Counsel to Carlos Abate Parada (liquidator and foreign representative)

•  Sequor Law

Founding shareholders Gregory Grossman and Edward Davis with partner Arnoldo Lacayo in Miami

In the Isle of Man

Counsel to Carlos Abate Parada (liquidator and foreign representative)

• Callin Wild