Swiss Federal Office of Justice orders handover of frozen funds to US authorities

In a decision dated 12 June 2019 the Swiss federal Office of Justice (FOJ) ordered that all funds remaining in two bank accounts of Stanford International Bank Limited’s (In Liquidation) (SIB) held at SOCIETE GENERALE Private Banking (Switzerland) Ltd, Geneva (Soc Gen) totalling US$105.7 million be handed over to the US authorities. These funds have been frozen since the start of the liquidation process in 2009 and have yet to be handed over to the US authorities because of opposition from Soc Gen. Soc Gen are claiming a pledge over these funds to allow them to meet any judgments made against them resulting from US litigation claims being pursued by SIB investors.

Soc Gen’s position was that the funds should not be handed over to the US authorities because the provisions of the Swiss law governing the handover of these assets had not been met and in particular that Soc Gen had a valid and enforceable pledge over the assets and that they were able to demonstrate that their dealings with the Stanford Group were carried out in good faith. The lawyers representing the Antiguan Joint Liquidators put forward comprehensive arguments to the FOJ showing that Soc Gen’s position was incorrect. The primary focus of the FOJ in its decision was on the issue of good faith and whether Soc Gen could demonstrate that it had acted in good faith in their dealings with the Stanford Group.

In ordering the handover of funds the FOJ accepted the arguments presented by SIB and dismissed those of Soc Gen. The decision concluded that in its dealings with the Stanford Group that Soc Gen’s lack of good faith had been amply demonstrated. The decision referred to a 30 August 2013 decision by FINMA, the Swiss Financial Market Supervisory Authority, which found that Soc Gen had been in serious breach of its anti-money laundering duties in respect to the Stanford accounts. FINMA’s decision was upheld by the Federal Administrative Court in a 4 October 2016 decision – see link to the translation of the Swiss decision: ATAF B-5586/2013

Upon the handover of the funds to the US authorities the funds will be dealt with in accordance with the Cross Border Protocol and Settlement Agreement entered into between the Antiguan Joint liquidators, the US Receiver, and the US department of Justice and others. That agreement provides that one third of the funds will go to the Antiguan liquidation estate for distribution and that two thirds of the funds will go to the US Receiver for distribution.

The Joint Liquidators are recognised as an interested party in these proceedings and were thus able to make representations, via their Swiss lawyers, in support of the request to hand over the SIB funds with Soc Gen to the US authorities. Soc Gen has thirty days within which to appeal this decision.

The Antiguan Joint Liquidators are pleased with this decision and are hopeful that the funds will now be handed over to the US authorities.

Please note that there are additional frozen funds held in Switzerland in the names of related Stanford companies and the handover of these funds are the subject of separate proceedings.