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

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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.

Leyza F. Blanco Makes D&I North America Shortlist

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We are delighted to announce Sequor Law Shareholder, Leyza F. Blanco 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

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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’

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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.

ATTORNEY SPOTLIGHT: Nyana A. Miller

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Nyana Abreu Miller, recently appointed Counsel at Sequor Law, shares insights on the benefits of being a trilingual woman in the international law industry and her efforts to empower women in law.

 

In 2021, you were promoted to Counsel. How did the promotion change your role as an attorney?   
The promotion grew my responsibilities both within and outside of Sequor, changing the way I am perceived and providing me with new opportunities for professional growth, such as increased public speaking engagements. Within the firm, my position as Counsel entails significant managerial duties, such as supervising the Junior Associates.

 

How has your role as New Network and Regional Development Co-Director of IWIRC benefitted you as a Sequor Law Counsel? 
The role provides a great opportunity to network and get to know other women in the insolvency space. Our committee works to launch International Women’s Insolvency & Restructuring Confederation (IWIRC) networks in places that do not have a professional development group for women in insolvency. This has provided a platform for me to learn about the insolvency industry in different countries and to bring something new to the table. Working together with other motivated professionals on a project that we are passionate about helps to grow deeper professional relationships. When business opportunities arise within those relationships, we are not mere acquaintances who met at a conference, we are colleagues who have been collaborating on a passion project for years.

 

How does IWIRC help to empower women in law? 
For me, personally, it has been transformational to connect with other women who are succeeding and striving to grow in the same industry. At each IWIRC event, I am inspired by the many different role models that I encounter, and I find them to be very approachable and candid about what it has taken for them to succeed. These experiences have been essential in my ability to shape my own path.

 

You’re regularly invited to speak on topics related to international asset recovery. How have the opportunities impacted your role as a trilingual attorney? 
I was born in Brazil and raised in the U.S., with English being my second language after Portuguese. I learned to speak Spanish in the U.S. as a third language.
Since I work in Latin America a great deal, my language skills have opened many doors for me. Early in my career, I was invited to speak at events where there was no budget for translators or translations, so my multilingual capabilities gained me invaluable exposure. For example, I was a guest lecturer at the Federal Judicial College in Mexico City. It was an excellent opportunity to discuss the use of insolvency as an asset recovery tool with students of the Judicial College, and it would not have been possible to do in English.
Of course, I also participate in larger conferences that do have simultaneous translation, such as the OffshoreAlert Conference, but where English is not the common language for all panelists and most of the audience, sometimes it is more convenient to conduct the panel in the local language.

 

Given your tenure as an asset recovery attorney, what is the most important thing you have learned?  
The most important thing I learned is to follow my instincts and study the fact patterns as they relate to people in the cases. Our cases ultimately come down to people. It’s important to develop a sense of who the target is, their character, preferences and habits. An asset recovery case is only half legal strategy and the rest is about being able to anticipate and catch up to the target.

 

Does speaking three languages facilitate your work on cases? 
Absolutely! For cases that are document-intensive, being able to read the primary document myself is a game-changer. Translation takes time, costs money and is imperfect. When an important document is discovered or a decision is entered by the foreign court, I can immediately review the document myself and engage in a meaningful discussion about it. I still lean on the local council to assist in interpreting legal documents in Portuguese and Spanish, but at least I can participate in the brainstorming that takes place as events develop and significant documents are discovered.

 

What advice would you give to young female attorneys?
I advise young women to look not only for a variety of mentors and role models but also for sponsors within their organization. A sponsor is someone who will help channel good work and opportunities to you, and it is a person who will support you even when you make a mistake. Everyone makes mistakes but it is how they are perceived by leadership that is critical. When people in management feel that the mistake is relatable or perhaps reminds them of something that happened to them, the employee who made the mistake will simply get another chance. And when you are a working mom or the only woman in an organization, you don’t want a simple mistake to be interpreted as a lack of commitment or some deeper problem. It’s important to have someone in the management room to vouch for you and help everyone else to put things into the proper perspective.

 

How does Sequor Law distinguish itself from competitors in the market?
Because of the size and strength of our team, we are very nimble. We are not a shop of generalists that tries to be all things to all people. Each of our professionals has deep knowledge of asset recovery and significant practical experience. We vigilantly monitor developments in our area of practice and we are able to draw on our depth of knowledge when we advise clients and help them craft the best recovery strategy for their case.
The focus of an asset recovery case may change very quickly, and we need to be able to deploy investigative, analytical and legal resources wherever the target may pop up. We have capabilities in-house to be able to steer the ship. However, one very important aspect of our identity as a boutique firm is that we maintain a strong network of asset recovery professionals that we can rely on throughout the globe. So if the target buys an asset in a new offshore jurisdiction, we can phone a friend who will spring to action as part of our team.

 

What inspired you to study law?
As a child, I read all the Nancy Drew books. Although my heroine was a girl detective, when I actually got old enough to think about a career, I realized that I enjoyed the reading a bit more than I would enjoy driving around and chasing criminals. I realized that after a case was solved it had to be tried. My grandfather was a state court judge in Kansas, so he was a great role model and ambassador for the law. When I was in high school, he took me to the courthouse for a motion calendar and I decided that law was the path for me!

Sequor Law adds Attorney Jennifer Mosquera to Team

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Miami, Florida-   Sequor Law is pleased to announce the addition of Ms. Jennifer Mosquera to the firm as an Associate Attorney effective February 14, 2022.  Jennifer joins an already impressive roster of talented, hard-working award-winning attorneys.   The addition of Jennifer confirms the firm’s ongoing dedication to growth and its commitment to the development of new attorneys.

“We are eager to have Jennifer, a talented bi-lingual attorney who will strengthen our firm by adding to the high caliber of skill and integrity we have at Sequor Law.  She brings with her the expertise, knowledge and commitment that our clients expect,” said founding shareholder Gregory S. Grossman.  “Jennifer is the second attorney added to our roster in the last six months. Our ongoing growth is directly tied to our strategic plan.”

Prior to joining Sequor Law, Jennifer served as a law clerk to the Hon. Judge Mark W. Klingensmith at the Florida Fourth District Court of Appeal.   She worked on a variety of complex issues within foreclosures, breach of contract claims, and fraud-based disputes among other civil cases

Jennifer received her J.D. graduating magna cum laude in 2019 from Florida State University College of Law.  An award-winning student, Jennifer was on the Dean’s List, was a merit scholarship recipient and was on the board of both the Florida State Law Review and the Florida State University College of Law Moot Court Team. During her time in law school, Jennifer interned for multiple judges, clerked for the Consumer Protection Division of the Office of the Florida Attorney General, and held a summer associate position with an Am Law 200 firm.  She obtained her B.A. in Political Science and her B.A. in Philosophy from Florida International University in 2016.

Jennifer Mosquera’s practice is focused on asset recovery, bankruptcy and insolvency, financial fraud, international commercial litigation and judgement, and arbitral award collection as well as corruption and proceeds of crime recovery. She is fluent in English and Spanish and is admitted to practice in Florida.

“The addition of Jennifer adds strength and depth to our capabilities, and I look forward to working with her to continue to deliver comprehensive, top-tier service to our clients.” said Shareholder Leyza F. Blanco.

******

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.

Dingway case in GRR

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Hong Kong liquidators obtain pre-recognition discovery relief in Miami

A Hong Kong headquartered, British Virgin Islands-incorporated company’s provisional liquidators have obtained emergency relief in the US to conduct discovery on a property it used to own in Miami, which they allege has been wrongfully transferred at least three times in the last three years.

On 3 February, Chief Bankruptcy Judge Laurel M Isicoff in the US Bankruptcy Court for the Southern District of Florida, granted an emergency motion allowing the liquidators of Dingway Investment Limited, Teneo’s Russel Crumpler in the BVI and KPMG’s Fergal Power in Hong Kong, to conduct proposed discovery under federal and local bankruptcy rules in the US, before they are formally recognised under Chapter 15.

The pair submitted a recognition petition before the Miami court on 27 January, just three days after a Hong Kong court opened a winding-up petition against Dingway at the request of its majority shareholder, Hong Kong-based China City Construction International (China City).

China City itself has also been in a creditor’s voluntary liquidation in Hong Kong since January 2019, and is currently being managed by KPMG’s global head of restructuring services Patrick Cowley and partner Lui Yee Man as liquidators.

Cowley, Lui and KPMG director Christopher Ball are also currently sitting as three of Dingway’s five directors.

In a declaration supporting Dingway’s Chapter 15 application, Crumpler explains that Dingway was incorporated in 2014 to indirectly purchase a “substantial” vacant land site in Miami’s Brickell Financial District through three intermediate Delaware companies.

At the time of the purchase, an entity called China City Construction & Development Co (CCCDHK) funded the US$86.7 million purchase price for the property, in return for an equivalent reduction to a US$204 million debt it owned to China City. The latter then passed the funds down the structure to the titleholder of the Miami property by way of a series of shareholder loans.

In October 2015, an entity called Champ Prestige took a 45% interest in Dingway for just over US$40 million, leaving China City with the remaining 55%.

Three years later, CCDHK brought an unsuccessful claim against China City in the Hong Kong High Court, arguing that China City had always held its shares in Dingway and the US$40 million that Champ Prestige had paid for its interest, on trust for CCCDHK.

It sought an order for China City to transfer the legal ownership of its shares and the money to CCDHK, but the court declined to grant the relief and CCCDHK discontinued the proceedings in December 2019.

Crumpler notes in his declaration that investigations by China City’s liquidators, Cowley and Lui, suggest CCCDHK and China City are ultimately controlled by the same people associated with a mainland Chinese company called China City Development Academy (CCDA).

CCDA indirectly held an interest in China City until April 2016 and obtained an indirect interest in CCCDHK in July of the same year. Despite one ownership interest ceasing before the other commenced, the same people seemed to exert a measure of control over both entities at all material times, China City’s liquidators claimed.

In particular, City City’s liquidators told Crumpler that an individual named Zeng Yuqi seemed to be a common director of China City and CCCDHK between February and September 2018, while another director of CCCDHK, Sze Wai Suen, was an authorised signatory for certain China City accounts as late as September 2016, among other things.

Crumpler claims that Zeng, acting as a “rogue director” and without authorisation from Dingway’s board or shareholders, signed an agreement in October 2019 to transfer its interests in the Delaware ownership structure and the Miami property to CCCDHK, for no consideration. He says Sze signed the agreement on CCCDHK’s behalf.

The provisional liquidator claims CCCDHK then sold the Delaware structure and Miami property to a Californian entity in November 2019 for US$70 million, with Sze as signatory again.

Crumpler says Champ Prestige, as Dingway’s minority shareholder, was initially prepared to cooperate with China City’s liquidators to try to retrieve its interest in the Miami property. But in March 2020, Cowley and Lui learned that Champ Prestige itself had been sold to CCCDHK for US$44 million.

Finally, on 30 December last year, Crumpler notes Cowley and Lui found out through an online news article that the Miami property had been sold again – this time for US$103 million to an entity belonging to Miami real estate investment firm Mast Capital and Boston private equity group Rockpoint.

The news article in the South Florida Business Journal reported that the property had been “seized” following “a legal battle with the previous owner”.

Submitted at the same time as their Chapter 15 application, Crumpler and Power asked the Miami district court for emergency provisional relief so they could investigate the latest transaction with Mast Capital and Rockpoint.

Specifically, they asked permission to issue and serve pre-recognition subpoenas for the production of documents on the two new acquirors and three Delaware entities they used to effectuate the sales, as well as two other Mast Capital companies that may have been involved in the sale.

Crumpler and Power argued that the proposed discovery was limited and targeted to obtaining information regarding the location of the closing proceeds for the sale.

They said they needed relief on an emergency basis to preserve the status quo of Dingway’s estate and prevent “further dissipation” of the Miami property’s proceeds of sale.

Granting the provisional relief, Judge Isicoff noted it was “narrowly tailored in scope and duration” and reflected that there were no parties in opposition.

The judge also said the “threatened injury” to Dingway’s estate outweighed “whatever damage the requested relief may cause an opposing party”.

Champ Prestige proceedings

Crumpler explains in his declaration that Champ Prestige originally brought an action in a Miami-Dade County court against China City and the Delaware entity that was the Miami property’s direct owner in June 2019, claiming the majority shareholder had breached its obligations under the sale and purchase agreement through which Champ Prestige had acquired its 45% interest in Dingway.

Among other things, Champ Prestige sought to impose and foreclose on an equitable lien on the property, and in December 2019 it secured a temporary injunction from the Miami-Dade court enjoining the land’s disposition. The injunction was expanded in February 2020 to also prevent any indirect dispositions or the sale of any interests in the three Delaware holding companies.

But after CCCDHK acquired Champ Prestige it voluntarily dismissed the Miami-Dade action and removed the lis pendens over the property.

Crumpler has also recorded that Champ Prestige filed a winding-up petition against Dingway and China City in Hong Kong back in February 2018, but no steps had been taken in the petition since March 2020, when Mr Justice Harris dismissed an application from China City to strike it out on jurisdictional grounds.

Crumpler explains in his declaration that Cowley and Lui, as China City’s liquidators, had wanted to try to recover its interest in Dingway and its ultimate 55% interest in the Miami property, but had been unable to take action due to lack of funding, and because of CCCDHK’s action in Hong Kong and the Miami-Dade proceedings.

When the Hong Kong court placed Dingway in liquidation, it issued a proprietary injunction against CCCDHK in respect of the US$70 million for the November 2019 sale of the property. It also issued a mareva injunction restraining CCCDHK, Zeng and Sze from dealing with assets of up to US$103 million.

The court was due to hold an inter partes hearing in Hong Kong to address Crumpler and Power’s continuing appointment as joint provisional liquidators and the injunctions on 4 February. GRR was unable to ascertain the outcome of that hearing by press time.

After they have obtained evidence in aid of their asset recovery efforts, Crumpler and Power intend to file actions and proprietary claims in the US, including claims against third parties in the US that may have damaged Dingway or owe it money.

The provisional liquidators have retained Sequor Law partners Fernando Menendez and Gregory Grossman as US counsel.

The Chapter 15 bankruptcy court has scheduled a full recognition hearing on 23 February.

In the US Bankruptcy Court for the Southern District of Florida

  • Chief Bankruptcy Judge Laurel M Isicoff

Counsel to joint provisional liquidators of Dingway Investment Limited

  • Sequor Law

Partners Fernando Menendez and Gregory Grossman in Miami

In the Hong Kong Court of First Instance  

In the matter of Dingway Investment Limited

  • Mr Justice Peter Ng

Joint provisional liquidators of Dingway

  • Teneo

Senior managing director Russel Crumpler in the British Virgin Islands

  • KPMG

Partner Fergal Power in Hong Kong

Counsel to petitioner China City (in creditors’ voluntary liquidation) and then to joint provisional liquidators

  • Tanner De Witt

Senior associate Veronica Chan in Hong Kong

ATTORNEY SPOTLIGHT: Raul Torrão

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Sequor Law Attorney, Raul Torrão, shared his insights about the legal industry on this month’s Attorney Spotlight.

 

Why did you choose to become a dual-licensed attorney in Florida and Brazil? 
I decided to become a licensed attorney in the U.S. to pursue and advance my career in international law. Born and raised in Brazil, I worked as an attorney for a few years in São Paulo, mainly with international clients. There, I saw that studying the common law system and being licensed in the U.S. would be a great asset that few attorneys have the chance to add to their skillset. I specifically chose Florida for two reasons: Florida is the gateway between Latin America and the rest of the world, and I am absolutely passionate about Miami.

 

Why did you elect to join Sequor Law? 
Sequor Law offers many advantages that an attorney would generally seek in a law firm. Foremost, is that I work with some of the top practitioners in the area, and nothing compares to learning from the best. When it comes to asset recovery and cross-border insolvency, my colleagues are often contributing to developing case law. Also, the international asset recovery practice is interesting and rewarding. The investigative work involved is fun, and representing people who were defrauded or otherwise done wrong is personally fulfilling, believing, as I do, that the practice of law is an instrument of justice.

 

What practice areas do you focus on? 
My practice is focused on international asset recovery–from foreign judgment domestication and enforcement to fraud and divorce cases–as well as cross-border insolvency.

 

How does having legal experience in another jurisdiction impact your skillset and ability to help clients? 
Having experience as a Brazilian attorney while working on international cases as a U.S. attorney is like having an extra set of tools in my tool-belt. It is helpful in a variety of ways. For example, when representing a Brazilian client, speaking the same language goes a long way, and I am not just referring to the fact that we both speak Portuguese; I mean understanding the cultural nuances, the legal terms, the legal system, and so much more. Precise communication is a tremendous advantage for both the client and the firm. In addition, expertise in both U.S. and Brazilian law is invaluable when they are the two sides of the same coin, as they often are in our cases. That sort of in-depth knowledge comes in handy while developing the case strategy with the client and prosecuting the case in the US.

 

Could you provide an example of how that skill set helped forward client objectives? 
Just as some words only exist in Portuguese–such as “saudade”, meaning the empty feeling in your heart when you miss a loved one– some Brazilian legal concepts are difficult to translate and explain if one is not familiar with comparable terms in English. A good example of how that knowledge is key to forwarding clients’ objectives and one I encounter in my daily practice, involves deciphering the details surrounding a Brazilian judgment in a judgment domestication and enforcement action in the U.S.
First, the client can make a more informed decision when the process in the United States is explained in familiar terms, with greater attention to the diverging points, such as, what are the enforceable assets of the debtor. Second, efficiencies are greatly increased when the attorney can read legal documents in their original language and knows what other documents might have key additional information. Third, the attorney can rapidly identify inaccurate allegations presented by the judgment debtor and prevent them from causing delays in the case. For example, an inaccurate allegation that the document presented was not a judgment under Brazilian law or that a certain interim appeal pending in Brazil had suspended the Brazilian enforcement action can be quickly clarified to the court, getting the case moving forward without delay.

 

Does your knowledge and experience abroad help you in cases that are not specifically related to Brazil? 
Absolutely! Knowledge and experience with how the civil law system works is transferable in a great number of cases involving other civil law jurisdictions. Having the mindset of an attorney trained in different jurisdictions helps to keep one mentally agile, ready to pivot and generate new and inventive solutions.

 

How is Sequor Law different from other competitors? 
In addition to a team of multilingual attorneys and professionals, the team leverages decades of multi-jurisdictional experience in asset recovery practices and their access to an extensive global network sets the firm apart.

 

What advice would you give a bilingual attorney fresh-out-of-law-school?
Work with an international law firm to assist with international clients and in a geographical area that has many corners.

 

What is your book genre preference for leisure reading?
Novels that have a touch of real history, mixing reality and fiction.

Sequor Law Attorneys Recognized by Lawdragon 500

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Sequor Law is pleased to announce that Lawdragon 500 has once again recognized four of the firm’s shareholders naming them as leading Bankruptcy & Restructuring Lawyers for 2022.