The Supreme Court left no chance for the fraudulent conveyance scheme: AVELLUM and Hillmont Partners once again successfully defended the rights of US investors

For the second time this summer, AVELLUM together with Hillmont Partners successfully defended the rights of US investors Argentem Creek Partners (ACP) and Innovatus Capital Partners (Innovatus) in a high-profile bankruptcy case of Olimpex Coupe International LLC (Olimpex).

ACP and Innovatus provided GNT Group with a USD95 million facility. The loan was secured by assets and suretyship of Ukrainian and foreign companies, including the suretyship from Olimpex.

However, the GNT Group defaulted on its debt repayments and attempted to withdraw the property from Olimpex’s ownership through a complex scheme of business transactions. The GNT Group mortgaged the assets to banks in breach of loan agreements with American investors. Just before the opening of bankruptcy proceedings against Olimpex, the opponents implemented a complex multi-level fraudulent conveyance scheme. The bank sold the mortgaged property to a third party, who then sold it to another party in an attempt to create a “bona fide” purchaser. That party subsequently mortgaged the property in an effort to hinder its return to the rightful owner.

This is already the second case in which the Supreme Court has stopped a fraudulent conveyance scheme involving Olimpex’s pledged property – part of the grain terminal in the Odesa port (dry grain terminal).

The Supreme Court adhered to its previous position and findings. The Court not only analysed the essence and circumstances of each transaction individually but also assessed the transactions in their entirety as a scheme designed to evade obligations to creditors. The assets were disposed of at an undervalue, and the agreements conflicted with the debtor’s obligations to its creditors. The true purpose of these transactions was not ordinary commercial activity, but the prevention of creditors’ claims from being satisfied in the bankruptcy proceedings. Such conduct constitutes an evident misuse of private law instruments contrary to their purpose, which formed the basis for granting the claim.

This judgment of the Supreme Court once again demonstrated the evolving judicial practice in disputes concerning the invalidity of fraudulent transactions (transactions concluded to cause harm to creditors) in bankruptcy cases. This decision highlighted the Court’s comprehensive analysis of the transaction scheme and the relations between the companies, as well as their impact on the debtor’s financial standing and the creditors’ ability to satisfy their claims. This approach enhances the protection of creditors against unscrupulous debtors and misuse of property.

The AVELLUM team was led by senior partner Kostiantyn Likarchuk and partner Vadim Medvedev.

Hillmont Partners was represented by managing partner James Hart, senior partners Andriy Nyzhnyi and Valentyn Zasukha, together with partner and Head of the Lviv office Andrian Artsishevsky.