Art for Fraud’s Sake – Fraud Intelligence Article by Christopher A. Noel

The glamorous, uber-wealthy, largely unregulated and opaque world of art dealing and collecting has intrinsic features that make it vulnerable to fraud. Christopher A Noel of Sequor Law sketches recent cases and legislative steps toward combating the problem.

Andy Warhol is famously quoted as saying, “Art is what you can get away with.” Since the explosion of the contemporary art market during the past two decades, artists, collectors and fraudsters alike have embraced Warhol’s precarious perspective. The modern art market no longer exists in wood-panelled galleries lining the streets of London, Hong Kong and New York. Today’s collectors are mobile, purchasing artworks at all price points, sight unseen, during their commutes and while on holiday. These new business practices have had positive impact – UBS estimates that global art and antiquities sales in 2021 reached an estimated US$65.1 billion, surpassing even the peak sales figures seen in 2019.

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Leyza Blanco Featured as IWIRC Florida Member Spotlight

Sequor Law Shareholder Leyza Blanco, and IWIRC International’s Immediate Past Chair was this month’s IWIRC Florida’s member spotlight. Did you know Leyza started her career as a public school teacher? 

Attorney Spotlight: Barbara Miranda

Read Barbara's Bio

How helpful is it for Sequor Law to have an in-house investigator?

In-house investigation capabilities are very beneficial to Sequor Law and its clients for multiple reasons:

  • We are able to obtain information more readily than other firms that have to employ investigators to conduct public record searches;
  • We are able to obtain records in multiple offshore jurisdictions known to be used to conceal the beneficial owners of assets;
  • We are able to not only identify assets but also identify any legal impediments to seizing those assets and incorporating this information to develop our legal strategy;
  • We are able to identify connections that may be overlooked by other firms given that we have both the legal and investigative capabilities in-house and are in constant communication regarding our cases.

What is your role when it comes to domestic and international asset tracing and recovery investigations?

At Sequor Law, I serve a dual role as an attorney and an investigator. Thus, I not only oversee and/or conduct asset tracing and recovery investigations, I also litigate judgment and arbitral award enforcement cases that require asset tracing and recovery. In my capacity as an investigator, I conduct certain investigations in-house, as well as coordinate and manage investigations conducted by third-party firms we may use to obtain information in both domestic and foreign jurisdictions.

Tell us about the types of cases that require the work of a Director of Investigations.

I think all cases require some level of investigation. Nonetheless, the cases within Sequor Law’s expertise, fraud, corruption, judgment and arbitral award enforcement, foreign bankruptcy domestications, etc., in particular, require a higher level of investigation to identify connections that may lead to recoverable assets or value.

What skills do you draw upon when it comes to asset tracing and recovery cases?

My inquisitive nature allows me to continue digging for links. I am also detail-oriented and keep notes throughout the case, which allows me to make connections between individuals and/or entities as we continuously obtain more information.

What has been the most challenging case you’ve worked on at Sequor Law?

Every case in our practice has its challenges given the nature of what we do. Fraudsters continue to employ methods to obfuscate their ownership of assets across multiple corporate layers in various offshore jurisdictions. Notwithstanding, I have worked on a case where the debtor lived an expensive lifestyle with no discernable income. He operated completely outside of the conventional banking system and changed nominees often, making it difficult to identify assets.

What is the most rewarding part about your job?

At the end of the day, my motivation for becoming an attorney was being able to assist people in difficult times. Providing clients with a solution is the most rewarding part of my job.

How has Sequor Law allowed you to continue to advance in your career?

As previously indicated, my dual role allows me to not only advance as an investigator, but also as an attorney as I continue to use both skill sets on a daily basis.

What inspired you to pursue this path in your law career?

I consider it more divine intervention than a conscious decision on my part. I stumbled upon this opportunity after working as an investigator for several years and discovered that the practice area fit my interest.

What advice would you give to young attorneys who are looking to pursue this legal specialty?

I would recommend that they attend conferences like OffshoreAlert and C5 to develop connections with individuals and firms in this field, as well as learn from the presenters’ different methods they employ in these types of cases.

If you weren’t practicing law, what would you do?

As far back as I can remember, I always told my parents that I would be an attorney due to the hardships that my father faced in Cuba, so it is difficult imagining any other path. I guess I would probably be a veterinarian, given my love for animals. My family is filled with animal lovers and I always had a variety of animals growing up. I currently have dogs, cats and fish, which I love, so that would probably have been the alternate path I would have chosen.

 

 

US Supreme Court Rules on Use of Section 1782 in Support of Arbitration Proceedings

In a unanimous decision, the U.S. Supreme Court held that two arbitration tribunals—one private and one investor-state—did not constitute “foreign or international tribunal[s]” under 28 U.S.C. § 1782. The statute is widely used by litigants to obtain discovery “for use in a proceeding in a foreign or international tribunal.” The decision came after years with a split among the Courts of Appeals on the issue, particularly in the area of international private arbitration.

In its 17-page decision, the Court analyzed the language of the statute and its history noting that § 1782’s purpose is comity. The Court reasoned that a broad reading of §1782 “would open district court doors to any interested person seeking assistance for proceedings before any private adjudicative body—a category broad enough to include everything from a commercial arbitration panel to a university’s student disciplinary tribunal.” Opting for a narrower construction, the Court held that “only governmental or intergovernmental adjudicative bodies constitute a ‘foreign or international tribunal’ under § 1782”, adding that, “[s]uch bodies are those that exercise governmental authority conferred by one nation or multiple nations.”

More on the decision can be found here.

 

 

Sequor Law Recognized by Chambers & Partners

June 6, 2022 Miami, Florida- Sequor Law, a Miami-based international law firm working in the areas of asset recovery, financial fraud, insolvency and financial services litigation, both domestically and crossborder, is honored to have been recognized by Chambers & Partners in the 2022 USA Guide for Bankruptcy Litigation Band 2. Sequor Law is also ranked globally for Asset Recovery in the 2022 Guide for Asset Recovery Band 2.

Chambers USA ranked Sequor Law as “Highly regarded for its contentious bankruptcy practice. Areas of expertise include Chapter 15, with experience in cross-border filings, especially in Latin America. Also draws on its knowledge of fraud for investigations into asset recovery and other complex bankruptcy matters.” Clients commented, “They repeatedly deliver on their promises and do what they say they’re going to do on time.”

Additionally, Sequor Law attorneys have also been individually ranked. Shareholder Leyza Blanco has been ranked Band 1 for Bankruptcy Litigation and Band 2 for Bankruptcy Restructuring, Founding Shareholder Gregory Grossman has been ranked Band 2 in Bankruptcy Litigation and Shareholder Fernando Menendez has been ranked Band 3 in Bankruptcy Litigation in Florida.

“Being recognized as one of Florida’s highly acclaimed attorneys for my ability to advise on and litigate on bankruptcy cases with international interests is a tremendous honor. Reaching the highest Band in Chambers has been an achievement that is a fulfillment of hard work and dedication, “said Leyza Blanco, Shareholder at Sequor Law.

Gregory Grossman, Founding Shareholder at Sequor Law stated that “It is an honor for our firm and individual attorneys to be ranked by Chambers & Partners. The rankings are a validation of the collaborative role of our entire team of professionals, and the creative and innovative strategies we employ as a team in reaching our clients’ goals.”

Chambers & Partners USA ranks the work of the leading law firms in the United States and their attorneys in a variety of practice areas. Individual lawyers are ranked in their practice-area(s) on the basis of their legal knowledge and experience, ability, effectiveness and their client-service. Law firms and attorneys are ranked on the quality work of their lawyers, as well as the effectiveness and capability of its entire team, including its strength and depth. Both client input and Chambers’ own research are considered for ranking placement in the Chambers Guide.

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Sequor Law is a Miami-based international law firm representing financial institutions, sovereign governments and state-owned enterprises, public and non-public companies, insolvency practitioners and individual clients in the areas of asset recovery, financial fraud, insolvency and financial services litigation. More information is available at www.SequorLaw.com.

Click here to view full PDF.

Thought Leaders 4 Fire: FIRE International Vilamoura, Portugal May 19, 2022

Sequor Law Shareholder Leyza F. Blanco was a panelist at ThoughtLeaders4 FIRE International where she participated on the Attack the Sham panel about asset recovery toolkits along with co-panelists Hannes Arnold, Senior Partner – GASSER PARTNER Attorneys at Law, William Redgrave, Partner – Baker & Partners, Simon Jerrum, Partner – HFW.

ATTORNEY SPOTLIGHT: Christopher A. Noel

Sequor Law Counsel, Christopher A. Noel, shared his insights on Art Fraud in the legal industry on this month’s Attorney Spotlight.

 

 

 

 

 

What practice areas do you focus on?

Asset recovery, corruption and proceeds of crime recovery, financial fraud, and international commercial litigation and appeals. My practice involves representing clients ranging from sovereign governments and multinational corporations to court-appointed fiduciaries and private clients.

What is your role when it comes to asset recovery?

The role of an asset recovery lawyer is to be a member of a multi-faceted team focused on a core objective: recovering value for the client. Often, asset recovery counsel assembles teams of investigators and forensic experts to more fully understand the circumstances that gave rise to the dispute, and asset recovery counsel serves as a hub for all of the professionals working to advance the client’s objectives.

How common is art fraud?

Art fraud takes many forms – it can be based on a forged or otherwise inauthentic artwork, or as we see more commonly, it can be financial fraud perpetrated through abuse of the otherwise very private art market. As the global art market grows, and new consumers are brought into the market, the risk of art fraud increases.

What have been your most interesting cases regarding asset recovery?

Without disclosing privileged details, I have had an opportunity to work with our team at Sequor on a variety of interesting matters. The assets have ranged from NFTs and blue-chip artworks to monies held by state sponsors of terrorism and kleptocrats. Our work is truly global. Since joining Sequor, I have worked on matters touching North America, South America, the Caribbean, the UK, Europe, the Middle East, and Asia.

What motivates those who commit art fraud?

Motivation for fraud, and crime in general, is usually a case-specific matter. However, two key factors impacting fraud in the art market are: (a) the relatively high level of privacy afforded in fine art and luxury goods sales (private dealers and auction houses typically dislike disclosure of client and sale information); and (b) the relative ease of transporting art and other luxury goods across borders without declaration to customs officials. Because transactions are often conducted in private and the goods are easily transported, art fraud is a growing market for fraudsters around the world.

What are the personal consequences of art fraud in communities?

Art fraud has a direct impact on all consumers of art. When specific artworks are involved in litigation (because of fraud or otherwise), they are often stored pending resolution of the proceedings. This means that the art-consuming public will likely not have the opportunity to view the artwork until the dispute resolves. Additionally, fraud in any market increases transaction costs – leading to increased consumer costs either at galleries, art fairs or even when visiting museums.

Why is asset recovery important?

Asset recovery is a critical aspect of the law. The field of asset recovery covers a broad range of legal efforts, but it focuses on returning value to the client, who otherwise may not recover. A money judgment has limited value, but the post-judgment recovery is where a victim of fraud actually becomes close to whole again.

Have there been spikes in art fraud? If so, why?

As with any other type of financial fraud, there are market conditions that lend themselves to increases in fraudulent activity. The most clear example of this is whenever there is a spike in fine art sales, which may lead to increased art fraud within the market. Otherwise, spikes may also arise when dealing with inauthentic works, whereby a forger releases a tranche of works at once, often purporting that they came from a single previously-unknown collector.

What skills do you draw upon when it comes to art fraud cases?

Art fraud follows the same form as many other frauds that Sequor sees on a daily basis. The team at Sequor, however, is specially suited to handle art fraud cases because of our extensive history of successfully recovering artworks in fraud cases, as well as our relationships with the international art industry.

What behind-the-scene work goes into an art fraud case?

Art fraud, as is the case with most fraud matters, is a deeply personal wrong against a person or entity. Behind the scenes, Sequor acts as counselor and advisor to clients who are, in many instances, experiencing fraud firsthand for the first time. Sequor’s ability to match world-class legal practice with a hands-on and compassionate client relationship sets us apart in the market.

Do you have any advice for those interested in pursuing this as a legal specialty?

International asset recovery and fraud litigation is an extremely interesting and dynamic field. Anyone interested in going into this area of the law should make best efforts to both master their understanding of the US legal system while also gathering an understanding of international legal systems and politics. It is truly a rare occasion where one of our cases does not involve facts and claims in multiple countries on multiple continents.

Given your tenure as an Attorney at Sequor Law, what is the most important thing you have learned? 

Persistence and professionalism. Persistence is key because a common defense strategy is to lay in wait for the prosecuting attorney to make the first move. Without persistence, our clients may not recover the value they lost, or they may unnecessarily wait for a recovery, thereby allowing their opponent time to hide or shield assets subject to recovery. Professionalism is also a key aspect of our practice. Dealing with professionals and clients around the world requires a highly professional and adaptive demeanor. Additionally, professionalism is an aspect of the legal practice that is often the first thing lost in stressful and tense situations. The adage that one catches more flies with honey than with vinegar is a good rule to practice by.

What inspired you to study law ?

I studied law for two reasons. First, I appreciate the logic that the law provides. Decisions in the common law system are largely based on prior precedent that builds upon past cases and creates a body of law from which lawyers can pull based on the individual facts of each case. Additionally, the feeling of helping victims is second to none. Sequor prides itself on only representing those who have lost out at the hands of others’ wrongdoing. It is a great feeling to go to sleep at night knowing that I am trying to do good every day.

What is most significant about being a lawyer in this day and age?

The most significant aspect of being a lawyer today is the fast-evolving nature of our practice. During the COVID-19 pandemic, courts and law firms were required to quickly adjust to a remote world or else they faced dire outcomes for pending and new cases. While the law is typically a slow-to-evolve profession, the past few years have finally launched the practice into the new millennium. These advances in technology also assist practice in general – Zoom has made it easier to communicate with clients and colleagues around the world, and advances in artificial intelligence have made analyzing huge sets of data more efficient both in terms of time and cost. I look forward to seeing how technology further impacts the practice in the coming years as everyone re-adjusts to a (hopefully) post-COVID world.

What advice would you give to young attorneys?

There are three pieces of advice that I would give younger attorneys today. First, make sure that you are a master of procedure if you are a litigator. The party who better knows the rules of procedure is at an extreme advantage over his adversary. Second, strive to get as much hands-on experience as possible. Seek out opportunities to shadow more senior lawyers, volunteer to take depositions and argue at motion calendar, and if possible, work on a trial as early as possible. Finally, explore the various areas of practice. It is uncommon now for a lawyer to remain in one area of practice for their entire career – if you do not feel rewarded in one practice, explore others until you find something that excites you every day.

What do you like most about Sequor Law? 

Sequor is unlike any law firm I’ve ever worked with. Our team is like a family and our boutique size allows us to cross-collaborate on many matters, leading to more creative and well-rounded solutions for our clients. Sequor also focuses on attorney development to a degree that I am unaware of at any other firm. Young attorneys are encouraged to follow their passions within the firm’s general practice areas, and they are encouraged to write, speak, and network in ways that meaningfully grow a young attorney’s practice at an accelerated yet manageable rate. 

Thought Leaders 4 Fire: FIRE International Vilamoura, Portugal May 19, 2022

Incoming ICC FraudNet Co-Executive Director Rodrigo Callejas with Strategic Partner James Pomeroy and former Executive Director Edward H. Davis in Cyprus for the FraudNet Spring meeting.

Liquidators of BVI Funds Linked to 1MDB Win Recognition in Florida

Ben Clarke
18 May, 2022

The joint liquidators of three 1MDB-linked British Virgin Islands funds have secured recognition of their appointments in Miami, pledging to obtain discovery in the US to help with their recovery efforts.

In an oral ruling on 18 May, Judge Robert Mark in the US Bankruptcy Court for the Southern District of Florida recognized the BVI liquidations of SRC International (Malaysia) (SRC BVI) and subsidiaries SRC Strategic Resources and Bright Oriande.

The judge also granted a motion to jointly administer the proceedings.

While Judge Mark agreed to recognize the liquidators’ appointments, he questioned the draft order provided – particularly a clause that would have blocked any party from bringing a claim against the joint liquidators in any US court without first obtaining leave of the bankruptcy court.

Counsel to the liquidators, Sequor Law’s Juan Mendoza, said the clause was included to enforce the Barton doctrine, established by the Supreme Court to require any party wishing to bring a claim against a receiver to first obtain the leave of the court that appointed the receiver.

He said the clause was actually “Barton-lite” because they were not requesting potential litigants gain approval from the BVI courts to launch an action against the joint liquidators in the US.

The judge said he would take the clause out but would include it in an amended order if he is provided with the relevant authorities.

He said he didn’t fault the purpose or intent of the clause, to prevent the potential harassment of the joint liquidators, but he considered it “pretty sweeping relief” that pre-empts unknown future events.

Fraud scheme

The rulings come after the joint liquidators, BVI-based Helen Janes of Hyperion Risk Solutions and Quantuma’s Angela Barkhouse in the Cayman Islands and Carl Jackson in the UK, filed Chapter 15 proceedings last month in an effort to recover some of the billions of dollars allegedly stolen from Malaysian sovereign wealth fund 1MDB.

Various authorities around the world have been investigating 1MDB and an entity it established in Malaysia, SRC International (SRC Malaysia), for the last seven years over a huge fraud that saw about US$8.5 billion diverted from them to numerous entities and individuals.

During the short recognition hearing, Mendoza highlighted some of the suspicious transactions the joint liquidators have identified involving the three debtor companies – including over US$1 billion of funds transferred from SRC Malaysia to SRC BVI bank accounts in Hong Kong and Switzerland, and about US$60 million transferred to SRC Strategic Resources.

Mendoza noted SRC BVI invested almost US$250 million into three funds of segregated portfolio company Asia Momentum Fund, which only ended up with a balance of about US$17 million.

He also highlighted about US$652 million of investments in two BVI companies between 2011 and 2014, which he said “basically evaporated” as a result of redemptions that left no trace.

Janes said in court filings last month that most investigation attempts in Malaysia were thwarted by the Malaysian government because the country’s Prime Minister, Najib Razak, was the force behind the creation of 1MDB.

But Najib was removed from office in 2018 and has faced criminal and civil proceedings with other co-conspirators in relation to the misappropriation of 1MDB funds.

While the US Department of Justice has also investigated multiple parties, and last month secured a conviction against former Goldman Sachs banker Roger Ng for his role in the scandal, Janes said it has focused its efforts on 1MDB and not SRC Malaysia, the parent of the three BVI funds.

The joint liquidators have issued proceedings against companies in multiple jurisdictions since they were appointed last Summer, but Janes said they suspect there are other entities related to the fraud that are yet to be uncovered.

According to Janes, SRC BVI has been principally used by fraudsters throughout its existence to misappropriate funds, and Bright Oriande is believed to have been established solely to divert funds from 1MDB and SRC Malaysia.

With recognition of their appointments, the joint liquidators intend to obtain discovery relating to transactions involving the debtors so they can take steps to potentially realize assets for creditors.

 

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 Janes 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 attorneys Juan Mendoza and Jennifer Mosquera 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 Janes 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.