The liquidators of a British Virgin Islands-based company, SRC International (Malaysia) Ltd, that invested in the Cayman Islands Asia Momentum Fund, have petitioned to place the fund’s liquidation under the supervision of the Cayman Grand Court because it is part of the 1MDB fraud.
They argue that the court supervision is necessary to prevent the immediate dissolution of the company and to allow court-appointed official liquidators to investigate the business and its segregated portfolios.
The Asia Momentum Fund was put into voluntary liquidation on 13 Sept. 2021.
The petitioner, SRC BVI, was a wholly-owned subsidiary of 1 Malaysia Development Berhad (1MDB) and later under the ownership of the Malaysian Ministry of Finance.
The petitioners said they have claims in excess of US$212 million against Asia Momentum Fund, its investment manager and investment advisor, the Indonesian Syailendra Group, as well as others for “breach of contract, breach of trust, dishonest assistance, knowing receipt and unlawful means conspiracy”.
$4.5 billion fraud
The petition claims that the investment from SRC BVI into the three segregated portfolios of the Asia Momentum Fund is connected to the fraud perpetrated against 1MDB.
About $4.5 billion are said to have been allegedly misappropriated from the Malaysian state investment fund in a fraud that involved a complex network of companies and banks around the world.
Criminal proceedings are ongoing in various jurisdictions, including Malaysia and the United States, where earlier this month a corruption trial started against a Goldman Sachs banker, allegedly implicated in the scandal.
Najib Razak, a former prime minister and minister of finance of Malaysia, who was also chairman of 1MDB and an advisor to SRC Malaysia, was sentenced to 12 years in prison in Malaysia in 2020 for corruption, money laundering and abuse of power. He is appealing against the decision of the Court of Appeal that upheld his conviction and sentence.
Malaysian financier Low Taek Jho, an associate of Razak, who exercised significant control over 1MDB without having a formal role, is facing ongoing criminal proceedings and continues to be a fugitive.
According to the court document, published by Offshore Alert, the $249,700,000 invested in the Asia Momentum Fund came from Malaysia’s public services pension fund to be invested in energy and mining projects.
The value of those investments declined significantly in a relatively short time period, because of their nature, poor management and breaches of duties owed to SRC BVI by the investment manager, investment advisor and other service providers, the petition said.
Investment performance and withdrawals
Within 10 years, the value of the three segregated portfolios dropped from $249.7 to $27.9 million, following redemptions and losses of approximately $110.1 million.
About $112.5 million were withdrawn and paid to various third parties, the petitioners allege.
This includes $56.5 million that were allegedly transferred to Bright Oriande Ltd., a BVI company with a Barbados bank account, that was controlled by Nik Faisal and Suboh Yassin, respectively the CEO and a director of SRC Malaysia.
Another $5.3 million were purportedly used to pay management fees to Curacao-domiciled Enterprise Emerging Markets Fund BV and Cistenique Investment Fund BV, which have been named by the US Department of Justice as “pass through vehicles” used by Jho Low and his associates as conduits to launder funds belonging to 1MDB and SRC Malaysia.
In addition, the petitioner considers about $25.5 million paid to Aabar Investments PJS Limited, in the Seychelles, to be fraudulent transactions intended to conceal funds belonging to 1MDB and SRC Malaysia.
The SRC BVI liquidators, who have also been appointed as the liquidators over other entities within the 1MDB and SRC Malaysia corporate structures, are part of an international effort to trace and recover funds misappropriated in the fraud perpetrated against 1MDB and SRC Malaysia.
They argued that court supervision of the Asia Momentum Fund’s liquidation was essential to investigate the involvement of the company, investment manager, investment advisor and others in the fraud.
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