Issue link: https://maltatoday.uberflip.com/i/1190498
12 maltatoday | SUNDAY • 8 DECEMBER 2019 NEWS MAT THEW VELLA THE accusations of a Curacao bank against the owners of IIG Bank, which has a Malta subsidiary, have now been levelled by the United States Securi- ties Exchange Commission against an investment advisor. The SEC complaint filed against The International Investment Group – a New York based member of Malta's IIG Bank group – alleges that it com- mitted "a string of frauds to cover up tens of millions of dollars in losses on bad bets and keep its investment advi- sory business afloat." IIG specialises in trade finance lend- ing, or risky loans to small- and me- dium-sized companies in emerging markets, and serves as the adviser on several private investment funds, namely the Trade Opportunities Fund (TOF), the Global Trade Finance Fund, and the Structured Trade Fi- nance Fund. According to the SEC, in 2007 IIG engaged in a practice of hiding losses in the TOF portfolio by overvaluing troubled loans and replacing defaulted loans with fake "performing" loan as- sets. "When it was necessary to create liquidity, including to meet redemp- tion requests, IIG would sell the over- valued and/or fictitious loans to new investors, including, ultimately, to GTFF and STFF, and use the proceeds to generate the necessary liquidity re- quired to pay off earlier investors." IIG is also accused of having taken $6 million from one of the funds under its control to finance a defaulted loan, making it appear that the borrower was creditworthy. To plug that $6 mil- lion hole it had created, IIG sold the fund a new fake $6 million loan so that it could reimburse the account it had raided to make the earlier payment. "The relief sought in this action, in- cluding an asset freeze, is necessary to, among other things, prevent fur- ther harm to Defendant's clients and to restrain and enjoin Defendant from violating the federal securities laws," stated the regulator. MaltaToday has previously reported that the owners of IIG Malta are also implicated in a multi-million lawsuit in a New York court, accused by a bank in the Caribbean island of Cura- cao of unjust enrichment in a $93 mil- lion loan 'scheme'. Until recently, IIG Malta was itself implicated in the case, accused of hav- ing acquired a line of credit from Gi- robank without paying back the mon- ey being loaned. But since the case got underway, IIG Malta is no longer directly one of the defendants, and instead it will be its ultimate beneficial shareholders – David Hu and Martin Silver – who have to answer to the accusations of Girobank. The bank says that Hu and Silver, as owners of the Internal Investment Group LLC – and directors of the Malta bank – acquired a controlling interest in Girobank, to extract loans from the bank without paying the money back. As a result of the "widespread fraud- ulent scheme", Girobank says that its financial position significantly de- teriorated, and was placed under an emergency measure and finally under control of the Central Bank of Cura- cao and Sint Maarten. The bank says that IIG Group made false representations in a bid to have its investment fund, Trade Opportunities Fund (TOF) ac- quire a controlling stake in Girobank, and then use the bank's cash for loans and pay out TOF's own creditors. Girobank says that although touted as its flagship fund, IIG's TOF had struggled after the 2008 financial cri- sis and approximately 70% of its in- vestors were demanding their invest- ments to be redeemed. "To improve TOF's financial position… Hu and Silver sought a deep pocket partner to which they would sell their trade finance loan portfolio, much of which was stale and defective, and reinvigor- ate TOF with new liquidity to pay off TOF's disgruntled investors." Crucial in the prospective sale was Girobank director Eric Garcia, who wanted to sell the majority sharehold- er Totalbank's stake in Girobank, to IIG. Since then, Garcia, 78, has been sentenced to four years in a Curacao prison for the embezzlement of $11 million, forgery and money launder- ing in a phoney mortgage scheme and for preparing a false bankruptcy re- port. According to Girobank, Garcia used his influence to overrule Girobank's account managers when they started to realise that TOF and IIG Capital were buying participation interests in loans that Girobank managers had re- jected. Girobank also accused Hu and Silver of having advanced loans to borrowers in Venezuela, a very risky jurisdiction. The Malta bank had denied being in- volved in any alleged scheme and said that it did not participate in the trans- actions at issue. MATTHEW VELLA MILLIONS in euros in Vati- can bank cash are at stake in a Maltese court case, as lawyers for the Holy See are now ask- ing the courts to prevent an in- vestment firm from selling its assets to a Hungarian company. God's bankers were caught up in a "menacing web of intrigue and suspicious transactions" – lawyers for the Vatican's bank claim – in an alleged €17 mil- lion ruse by Italian financiers who run Maltese investment firms. The Istituto per le Opere di Religion (IOR), otherwise known as the Vatican Bank, says a committee it set up to in- vest €30 million of its cash was misled by the directors of Futu- ra Investment Management – Alberto Matta and Girolamo Stabile – and their affiliated company in Luxembourg, Op- timum Management. Originally in 2013, the IOR set up a committee to decide on how to invest €30 million. The decision was to have Futu- ra buy out a non-performing loan of €32 million from the owner of the Exchange Palace, and then convert that loan into an 84% share in the Hungar- ian company redeveloping the property. But the IOR claims Futura made an undeclared profit of €11.6 million by duping the Vatican on the price of the Hungarian deal; and then by planning to sell Futura's 90% stake in the Exchange Palace's holding company, to Cougar Real Estate of Luxembourg, which is, in turn, owned by a Dubai firm. Now the Vatican's lawyers want to stop Futura from sell- ing its shares in the Exchange Palace to Cougar. The IOR says the Dubai firm Holdabco set up Cougar just nine days after its decision to buy the Exchange Palace loan. Cougar was used to acquire the non-performing loan for €20.4 million, with the resulting €11.6 million in Vatican cash going to Holdabco and another minority shareholder, a Pana- manian firm called Alpininves- tissements. "It is clear that the IOR has been abusively caught up in a menacing web of intrigue and suspicious transactions," the IOR's lawyers said, accusing Futura and its directors of in- flating the price for the Hun- garian loan. More recently, on 23 No- vember 2019, IOR learnt that Cougar was being sold to another company, Indotek Group Hungary. "Futura clearly intends to sell and dispose of its share in the development project by assign- ing its 90% share in the project via a sale of its shares in Cougar itself," the lawyers said. "Nei- ther Cougar nor Futura have provided IOR with any disclo- sure of the transaction leading to the sale of the investment." Futura has also sued the IOR, claiming the Vatican entered into contractual commitments to invest €41 million but only invested €17 million, and was therefore in default on the re- maining €24 million. IIG Bank owners face SEC fraud accusation in New York Vatican chases millions in bid to stop Malta fund from 'abusive' sale The IOR says a Dubai firm was used to create a real estate company just nine days after the IOR's decision to buy a 90% stake in the loan used for the redevelopment of the Exchange Palace of Budapest. But the Vatican bank claims it was duped into paying more money for the loan, after Cougar acquired the loan for 'just' €20.4 million, with a resulting €11.6 million in Vatican cash going to Holdabco