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Asset Finance: Foreign assets traced in the Arena fraud

Asset financiers have not had much comfort from the sorry tale of the Arena TV fraud, but we did notice with interest a passage in a recent judgment against the main perpetrator individuals behind the fraud which illustrates the principle that in certain circumstances victims of fraud can trace assets such as foreign property which the fraudsters have obtained with the proceeds of the fraud.

The judgment was in a case brought by the Arena TV administrators against the two individuals behind the Arena group of companies, and whilst the description of the fraud and the issues relating to assessing financial loss are of limited interest given the obvious impecuniosity of those individuals, there was at least some solace in the court’s approach to a claim to recover foreign assets:

“The claimants say that in addition they caused the claimants to trade whilst insolvent and they point to certain specific misappropriations that they say were made by the defendants in breach of their fiduciary duties to the company.

In particular they seek a declaration that the defendants jointly hold the property in Sitges Barcelona on trust for Arena Aviation. The plea at paragraph 23(5) of the amended particulars of claim is that between the 25th of November 2019 and the 26th of November 2019 the defendants wrongfully caused Arena Aviation to pay at least Euros 1.814 million to the client account of Eshkeri and Grau which they used to jointly purchase the Sitges property at a time when the claimant companies were insolvent. The evidence is that those payments were all misappropriated at a time when Arena Aviation was indeed insolvent. The claimants say that the payments and now the Sitges property are therefore held by the defendants on trust for the claimants as company property. Further the payments could not have been made for a proper purpose. The defendants could not possibly have considered in good faith that they would promote the success of the company for the benefit of its members as a whole and the defendants did not act faithfully in the interests of the claimants but they acted for their own interests in breach of s.175 of the Companies Act 2006 and their duty of fidelity. I am satisfied that these were indeed misappropriations for which the defendants are liable as acting in breach of their fiduciary duties to the company”.


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