Many international clients do not know that the United States Bankruptcy Code allows representatives of foreign insolvency proceedings to "on-shore" their proceeding in a United States court for the purpose of administering and recovering US-based assets. This relatively new (since 2005) chapter of the Bankruptcy Code--Chapter 15--provides foreign trustees, liquidators, and fiduciaries with a streamlined procedure for recognition of their foreign insolvency proceeding in the United States. Once a proceeding is recognized, the benefits are numerous. Among them are the foreign representative's power to take advantage of the automatic stay, the ability to manage US-based assets for the benefit of creditors, and the ability to take discovery under US rules, which is often broader than discovery rules in the foreign country. The foreign representative also has the ability to seize property to preserve assets and, in some cases, to unwind fraudulent transfers.
Two weeks ago, my colleagues at Rivero Mestre LLP and I filed a Chapter 15 petition in the United States Bankruptcy Court in the Southern District of Florida to on-shore the Estrategias en Valores, S.A. ("Estraval") liquidation proceeding in Colombia. Estraval was a financial investment company that allegedly defrauded victims out of over $220 million in a scandal relating to payday loans called libranzas. At least 4,000 investors, many from Colombia's lower class, were defrauded and may have claims against Estraval and their principals. The Estraval case often makes national news in Colombia, and has led to multiple criminal prosecutions.
On May 25th, Judge Laurel Isicoff granted the foreign representative's motion for provisional relief under 11 USC 1519, which gave the foreign representative the power to investigate the Estraval fraud in the US and to take action to preserve assets before a final hearing on the petition scheduled for June 23, 2017. This relief has been critical due to the scope of the Estraval fraud and the complexity of the parallel Colombian criminal proceedings.
Last night, Noticas Caracol did an investigative report on the United States portion of the Estraval liquidation. Caracol called the provisional relief order a "historic decision", and the Colombian Government believes that this relief is the first of its kind in a Colombian liquidation. The report can be found here:
The case is In re: Estrategias en Valores, S.A., et al., Case No. 17-16559-LMI