Bank Fraud

Worldwide Asset Freezing Orders Issued After Bank Cries $1 Billion Fraud

Even banks and other sophisticated financial institutions are sometimes caught out by apparently thriving businesses which are not all that they seem. In a case on point, the High Court came to the urgent aid of an overseas bank which claimed to have lost more than $1 billion as a result of wholesale fraud.

The case involved a UK-registered company which gave all the appearance of being highly successful but which collapsed in what the bank described as a calamitous fall from grace. It was placed in administration at the behest of the bank, to which it was very heavily indebted. With a view to recovering its losses, the bank subsequently launched proceedings against six individuals who were the company’s principal owners and officers.

The individuals denied any wrongdoing. The bank, however, alleged that they had colluded in a carefully orchestrated fraudulent scheme whereby false accounts were created to give a misleading impression of the company’s financial strength and performance. It claimed that the conspiracy was pursued for the individuals’ mutual benefit and involved the keeping of two inconsistent sets of accounts. In support of its claim, the bank sought worldwide asset freezing orders against them.

Granting the orders, the Court found that the bank had established a good arguable case, based on solid evidence, that each of the individuals had engaged in a major fraud. It had also shown that, unless restrained from doing so, there was a real risk of them dissipating their worldwide assets so as to frustrate enforcement of any judgment entered against them.

Although none of the individuals was believed to be habitually resident in the UK, the bank had shown at least a plausible evidential basis for asserting that the dispute fell within the jurisdiction of the English courts and that England was distinctly the most appropriate forum for the case to be tried. The Court also made asset disclosure orders against the individuals and authorised the bank to serve them with litigation documents outside the jurisdiction.

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