Background

One of FRP’s Partners was appointed as Trustee in bankruptcy over a former high-net-worth individual who had been a successful trader with substantial evidenced earnings. Following the extensive use of aggressive but ultimately failed tax avoidance schemes, he had built up significant debts to HMRC. While he was believed to have had substantial assets immediately prior to his bankruptcy and his divorce shortly before that, he declared nil assets in his bankruptcy estate, attributable mainly to his allegedly acrimonious divorce.

Action

Our specialist contentious insolvency team conducted an extensive review of the bankrupt’s affairs, including banking records from numerous foreign and domestic banks, solicitors’ and accountants’ records, land registry records, and many other sources of information, to build a comprehensive account of his financial history and trace material property transactions. Partnering with a trusted corporate intelligence specialist, the team investigated the bankrupt’s conduct and relationship with his ex-wife and a new partner.

These efforts quickly identified that the bankrupt’s portrayal of impoverishment following an acrimonious divorce was part of a wholesale attempt to keep assets out of the reach of his trustee. The team’s enquiries revealed a wide network of trusts, offshore accounts and third parties that had enabled the bankrupt to dissipate his estate in anticipation of his substantial tax debts and ultimate self-initiated bankruptcy.

Outcome

As a result of the findings of the investigations, and a subsequent strategic recovery campaign, a monetary settlement was reached with the bankrupt’s ex-wife in respect of the transfer of multiple UK and overseas properties prior to bankruptcy. Freezing injunctions and a subsequent judgment were also obtained against his new partner regarding transactions at undervalue as a result of assets and funds transferred to her, both of which enabled the team to recover funds and make a substantial dividend payment to the bankrupt’s creditors.