- August 9, 2016
- Posted by: Josiah Hincks Solicitors
- Category: Litigation Updates
The civil courts in London are favoured by litigants from around the world and, in a case which underlined their international repute, the High Court’s assistance was called upon to recover funds allegedly defrauded in a $1 billion Russian banking scandal.
A private bank was alleged to have been run effectively as a Ponzi scheme by its directors and principal shareholders. Through a web of offshore companies, very large sums of money were said to have been advanced to fund projects from which the directors alone stood to profit. A number of the loans had turned bad in the financial crisis and, after attempts to conceal the losses unravelled, the bank ultimately had to be rescued by a £1 billion bailout from the Russian Deposit Insurance Agency.
After the bank launched proceedings in London, an $830 million freezing order was issued against the assets of one of the directors and his wife. They applied to have that order set aside on the basis that there had been a failure by the bank to disclose relevant evidence and that there was no real risk of their assets being dispersed.
The director denied that he had acted fraudulently and the Court emphasised that it was expressing no concluded view on that issue. However, in dismissing the application and confirming the order, it noted that it was not obliged to close its eyes to the apparently obvious fact that what had been described as ‘balance sheet management’ was in fact ‘a Ponzi scheme with a fancy name’.
There had been some failures in evidence disclosure by the bank, but the Court found that it had a good arguable case that the director had acted dishonestly. The risk of dissipation was also sufficient to justify the order being maintained.