Yaroslav Bogdanov: The High Court of Justice accepts a law suit of defrauded investors of the Russian bank “Trust”

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Yaroslav Bogdanov: The High Court of Justice accepts a law suit of defrauded investors of the Russian bank “Trust”

апреля 22, 2020 - 10:56
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On January 23, 2020, the High Court of Justice in London issued a decision on the case of National Bank TRUST against the former owners and senior managers of the bank, namely: I. Yurov, N. Fetisov, S. Belyaev, which was filed on April 11, 2016. According to this decision, former shareholders and top managers of the bank were found guilty of violating the current legislation of the Russian Federation.

The requirements of Trust Bank to I. Yurov, N. Fetisov, S. Belyaev were based on the fact that, as shareholders and senior employees of the bank, having the opportunity to organize the adoption of any decision on behalf of Trust Bank, these persons were engaged in activities contrary to interests ofthe depositors of the Bank, having carried out the theft of funds of bank depositors in large amounts.

They arranged the approval by the Credit Committee of all the agreements and entered into credit agreements that were obviously unfavorable for the bank and other transactions with shell companies controlled by them (more than 300 companies in total), from which they received personal benefits through a network of intermediaries: the funds provided under loan agreements were transferred through the chain from one shell company to another and, ultimately, ended up in the personal accounts of I. Yurov, N. Fetisov, S. Belyaev and their wives.

At the end of 2014, as a result of an audit conducted by the competent authorities, it was revealed that Trust Bank, which was the 16th largest bank in Russian Federation in terms of individual deposits and had more than 400 branches in Russia, does not meet the basic requirements of the banking legislation of the Russian Federation.

On December 26, 2014, the Central Bank of the Russian Federation published data that a “hole” in the amount of 67 billion rubles (approximately 1 billion US dollars) was found in the balance sheet of Trust Bank during the audit. Considering that the amount of deposits in the bank for 2014 amounted to approximately 121 billion rubles, it turned out that more than 55% of depositors' money "disappeared" from the bank.

As a result of dishonest actions of the former owners of the Trust Bank, as well as the Trust Bank itself, the former investors (about 200 people) suffered, who, on the initiative of the Trust Bank, became holders of securities - credit-linked notes.

For theft of funds of former investors, subordinated loan agreements with affiliated structures and credit-linked notes were used. Credit-linked notes are financial instruments similar to bonds, but tied to a loan agreement. They are unknown to Russian law and cannot be issued in Russia. However, Russian legislation allows the acquisition of credit-linked notes of foreign issuers by Russian entities (subject to the status of a qualified investor of these entities). From 2011 to 2013, Trust Bank entered into three subordinated loan agreements with its affiliate Repackaging BV, established in the Netherlands, as a debtor. Based on these agreements, CL Repackaging BV acted as the issuer of credit-linked notes. These agreements indicated that the provision of a subordinated loan to Trust Bank was conditional upon CL Repackaging B.V. proceeds from credit notes funds. Credit notes were not sold in the free market. They were offered for purchase only to depositors of Trust Bank. That is, loans were issued at the expense of funds received from the sale of credit notes to bank depositors.

When implementing this scheme, money did not leave the Trust Bank. It remained within the Trust Bank, it turned from deposits into a subordinated loan provided to the bank.

The Russian fund “Fund for Protection of Investors' Rights in Foreign States” represents the rights and legitimate interests of holders of credit-linked notes who sufferedfrom the illegal actions of shareholders and top managers of the bank, which the Fund acquired under an assignment agreement.

On April 16, 2020, the representative of the “Fund for Protection of Investors' Rights in Foreign States”, Queen's Counsel, James Ramsden filed a claim form in the High Court of Justice in London against Trust Bank, the former owners and bank executives Ilya Yurov, Sergey Belyaev and Nikolai Fetisov, as well as their wives: Natalia Yurova, Irina Fetisova and Elena Pishchulina to recover damages in the amount of more than 300 million Pounds Sterling.

The Fund independently organizes the financing of the claim, and does not require credit holders to pay any monetary amounts. It is estimated that the total cost of considering a lawsuit can range from two to ten million dollars, depending on the number and qualifications of lawyers who will be involved in the consideration of this case. Any holder of credit notes of Trust Bank can join this lawsuit within four months by concluding a cession agreement with the Fund. The terms of the agreement are individual in nature, but do not imply any advance payment to the Fund by holders of credit notes.

Affected holders of credit-linked notes who wish to join this lawsuit can fill out a questionnaire on the Fund's official website www.lic-fund.org after that, the Fund's employees will contact them.