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 attorneyJuan 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

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