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.

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