ahmed zayat | Horse Racing Free Tips

MGG to Bankruptcy Judge: ‘Zayat Is a Perpetual Liar Determined to Hinder and Obstruct’

On Mar. 16, Ahmed Zayat asked a federal judge not to grant the trustee in his bankruptcy case extra time that had been requested to scrutinize Zayat's finances so the trustee could make sure the owner and breeder of Triple Crown champ American Pharoah was telling the truth about not being able pay $19 million in debts because he allegedly only had $314.22 to his name.

Now, one week later, MGG Investment Group, LP, the lender who is separately suing Zayat and his family members for allegedly obtaining a $24 million loan by fraud and then not repaying it, told the same court that the trustee's probe must be allowed to go forward because Zayat's attempt to put an end to the discovery process “does nothing more than establish that Ahmed Zayat is a perpetual liar determined to hinder and obstruct the Trustee, the Court and creditors at every turn.”

MGG's Mar. 23 filing in United States Bankruptcy Court (District of New Jersey) is rooted in the New York-based lending company's desire not to have Zayat's debts declared legally forgiven under the Chapter 7 bankruptcy protection he is seeking.

MGG has previously asserted in court that loans it made in 2016 to Zayat's racing and bloodstock business were the product of years of systematic fraud that Zayat allegedly orchestrated, including Zayat Stables' desperate selling-off of equine assets that had been pledged to MGG as collateral.

“There is only one reason the statutory meeting of creditors commenced in this
Case…has been kept open and must remain open—namely, notwithstanding Ahmed Zayat's unsupported assertions of cooperation, he has done everything in his power to frustrate the process,” MGG wrote in its objection to Zayat's recent cross-motion to move the case toward conclusion.

MGG's filing continues: “Far from being the 'honest but unfortunate debtor' that the Chapter 7 process aims to protect, Ahmed Zayat has demonstrated time and again that his ultimate goal is to manipulate the bankruptcy process to shield himself at the expenses of the Trustee and creditors.”

According to MGG, since Zayat filed for bankruptcy protection back in September, he has delayed the administration of his case by 1) Refusing to produce documents prior to the initial hearing; 2) Refusing to respond to “numerous questions” on the basis that he did not have the necessary documents in front of him; 3) Promising, then subsequently refusing, to produce requested materials; 4) Providing paperwork that was so heavily redacted that the documents made no sense.

“Ahmed Zayat should not be able to impede the Trustee's analysis or derail his investigation, all of which is being conducted for the ultimate benefit of the Debtor's creditors,” MGG wrote.

The primary role of a trustee in bankruptcy cases is to ensure that a debtor who files for federal bankruptcy protection is not hiding assets that could instead be used to pay creditors. An objection can be filed to the proceedings if a trustee believes aspects of the filing are not on the up-and-up. A judge can either dismiss a case on his own or by acting on a trustee's objection. A judge can also deny the discharge of a particular debt.

And if alleged fraud is uncovered in a bankruptcy filing, the Federal Bureau of Investigation can investigate, and the U.S. Department of Justice can prosecute if it believes a crime has been committed.

MGG wrote that in addition to supporting the trustee in his request for one more month to sift through documentation, the lender also wanted to “advise the Court of significant recent developments” that arose out of Zayat's testimony under oath at a Feb. 25 hearing.

Specifically, MGG alleged, documents pertaining to bank accounts in the names of Zayat's wife (Joanne Zayat) and son (Justin Zayat) are now “indisputably relevant to the Trustee's investigation and analysis, as they appear to have been used as conduits through which Sherif El Zayat, the Debtor's brother, loaned money to Ahmed Zayat.”

Last week, Ahmed Zayat's cross-motion included a letter from his attorney, Jay Lubetkin, who wrote that the trustee's request for the banking documents of family members didn't “have any apparent relevance to the Trustee's decision whether to file an objection to discharge complaint.”

Lubetkin also wrote Mar. 16 that “The Debtor has been extremely cooperative with the Trustee [and has] provided to the Trustee significant documentation respecting his financial affairs…. The Debtor has responded with voluminous documents in satisfaction of the Trustee's three very extensive document requests, and temporarily withheld only a small portion of those documents for legitimate, good faith, objectively supportable reasons…The Debtor [eventually] provided the Trustee with the temporarily withheld documents, and the Trustee has been in possession of all the requested documents for more than 60 days.”

MGG wrote in its Mar. 23 filing that “Ahmed Zayat has attempted to create a record based on false and misleading assertions.”

MGG's filing contained excerpts from email exchanges between Ahmed Zayat and MGG that date to Jan. 12, 2020, which was 10 days before MGG filed its bombshell lawsuit against him in a Kentucky court.

“It kills me and tore me part, not being transparent with you,” Zayat allegedly wrote at the time, apparently in an effort to stave off the impending legal action.

“I did not disclose to you why we had to sell some assets in order for us to fund and continue to operate Zayat Stables and allowing myself the time to find the capital to get you paid in full…. I did not want you to panic knowing that I still have a chance to save the day…

“There is still a glimpse of light that a miracle can happen,” Zayat allegedly wrote.

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Even As Fraud Suit Was Imminent, Zayat Now Claims Global Firms Wanted to Invest Hundreds of Millions

Ahmed Zayat, the financially embattled Thoroughbred breeder and owner whose insolvent business dealings are currently being scrutinized in three intertwined legal cases, revealed in an otherwise routine bankruptcy court filing Tuesday that prior to being sued for alleged fraud and loan defaults last year, he had lined up at least two global investment partners purportedly willing to pump hundreds of millions of dollars into his failing racing and bloodstock operation.

Most notably, Zayat claimed he had been tantalizingly close–just days away–from securing a $100 million “equity infusion” from an undisclosed entity in China that would have kept New York-based MGG Investment Group, LP, from suing him and other Zayat family members after their cash-strapped racing stable failed to repay loans and allegedly hid and falsified assets.

Zayat then stated that the “extremely aggressive and highly expensive” nature of defending himself from that lawsuit is what forced him to seek Chapter 7 bankruptcy protection last September.

Within that Mar. 16 document that is intended to speed up Zayat's personal bankruptcy case (now past the six-month mark in a federal court in his home state of New Jersey), the breeder who raced 2015 Triple Crown champ American Pharoah detailed a new timeline that suggests even as his financial world was imploding in January 2020, Zayat traveled the globe in a desperate effort to obtain fresh funding to get out from under MGG's $35 million loan.

But that hastily arranged deal never came through in time to prevent MGG from filing the suit that forced his Thoroughbred stable into court-mandated liquidation, according to the version of events Zayat attested to in his cross-motion.

“When MGG filed its Kentucky suit, I was pursuing for [Zayat] Stables a $100 million equity infusion from the Asian markets,” Zayat stated in the filing. “I attended a roadshow in China from Jan. 5, 2020, through Jan. 10, 2020, to pursue that capital infusion. MGG filed suit Jan. 17, 2020. Had MGG not filed its lawsuit in January 2020, the likelihood is that capital raise would have been consummated, resulting in MGG being paid in full.

“MGG encouraged me to pursue that capital infusion while it was secretly preparing the Kentucky suit and intending to exhaust {Zayat] Stables' bank account,” Zayat alleged.

In a different section of the same document, Zayat claimed that MGG “fraudulently induced Stables into a loan which involved a $10 million discretionary portion, never lent the full $35 million to Stables which was required, and admitted it never intended to lend to Stables the full $35 million.”

Zayat stated the money he sought in 2016 from MGG was intended to be a “bridge loan” because Zayat believed he had a bigger deal in the works with CVC Capital Partners, which describes itself as “a world leader in private equity and credit” that seeks to partner with “fundamentally sound, well-managed and cash-generative” businesses.

“At the time of the negotiations with MGG, [Zayat] Stables had a term sheet from CVC, one of the world's largest private equity firms, to inject $250 million equity into Stables for a 49% ownership interest,” Zayat stated in the court document. “Thus, the intent was for Stables to use MGG's $35 million as a bridge loan until an equity infusion transaction could be consummated.”

But that deal also fell through.

The proposed partnership between Zayat and CVC would have unraveled in either late 2016 or early 2017. Based on a different timeline of events laid out by MGG in its lawsuit, that's roughly the same time frame when Zayat and family members allegedly began selling horses and shares in breeding rights while telling the MGG those equine assets remained on the books as security against the loans.

While Zayat's two big-money, near-miss investment disclosures will generate headlines within the Thoroughbred industry, it isn't clear what purpose they serve in relation to the paperwork his legal team filed on Tuesday. The Mar. 16 filing is essentially is a request to get the trustee and creditors to stop grilling him about financial details so the bankruptcy proceedings can be brought to a conclusion.

“The Debtor has been extremely cooperative with the Trustee,” Zayat's attorney, Jay Lubetkin, wrote in an explanatory letter that accompanied the cross-motion. “The Debtor provided to the Trustee significant documentation respecting his financial affairs…. The Debtor has responded with voluminous documents in satisfaction of the Trustee's three very extensive document requests, and temporarily withheld only a small portion of those documents for legitimate, good faith, objectively supportable reasons…

“The Debtor [eventually] provided the Trustee with the temporarily withheld documents, and the Trustee has been in possession of all the requested documents for more than 60 days. The Trustee has personally inspected the Debtor's house with a real estate broker and [an] appraiser for more than two hours, more than three months ago.”

Lubetkin wrote that Zayat and family members are now being asked to turn over another round of detailed financial documents, “none of which have any apparent relevance to the Trustee's decision whether to file an objection to discharge complaint.”

Lubetkin summed up by writing that “In a further display of good faith, the Debtor was willing to consent to a short extension of the Trustee's deadline to file an objection to discharge complaint, if the Trustee agreed to limit the further continued meeting of creditors to one additional hour. Even that reasonable proposal was rejected by the Trustee. For the foregoing reasons, and for those set forth in the supporting Certification, the Debtor respectfully requests that the Court should enter an Order denying the Trustee's further request for an extension of the discharge objection deadline and compelling the Trustee to deem the meeting of creditors concluded.”

According to the cross-motion, among the additional items that the trustee has recently requested are a list of transactions from Zayat's TVG betting account and his credit card statements from 2016.

“Calendar year 2016 was the period immediately after the success of the Triple Crown winning horse American Pharoah, and there is no showing, and can be no showing,

that I was under any personal financial distress during that period of time,” Zayat stated.

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Report: MGG Brings New Motion In Bankruptcy Case Alleging Zayat Committed Fraud

The lengthy legal battle between New York firm MGG Investment Group and Triple Crown-winning trainer Ahmed Zayat continued with a new move last week, according to Thoroughbred Daily News.

Zayat declared bankruptcy earlier this year, seeking Chapter 7 protection. Now, MGG is asking a federal judge to order that Zayat can't get his debts to the investment group forgiven because the company says the $24 million in loans Zayat still owes were acquired fraudulently.

“[I]t is a debt…that was obtained by use of a series of statements in writing that were materially false, respecting an insider's (Zayat Stables) financial condition, on which MGG reasonably relied, and that Ahmed Zayat caused to be made or published with the intent to deceive MGG,” read a complaint filed by MGG. “[I]t is a debt for willful and malicious injury caused by Ahmed Zayat to the property of MGG within the meaning of [the] Bankruptcy Code.”

MGG's suggestion that Zayat was dishonest in his representations to the company isn't new; the basis for its much-publicized suit against Zayat in Fayette Circuit Court in Kentucky is based partly on allegations that Zayat failed to disclose the sale of nine breeding rights to American Pharoah or turn over the proceeds to the lender.

MGG Wants Zayat Debt Ruled ‘Non-Dischargeable’ Because of Alleged Fraud

MGG Investment Group, LP, is already nearly a year into a civil lawsuit initiated to try and recoup $24 million in loan defaults by Ahmed Zayat and his family-owned bloodstock and racing operation. Now the New York-based lender is going after the insolvent Triple Crown-winning owner and breeder in a different court by trying to get a federal bankruptcy judge to rule that some of Zayat’s debts shouldn’t be legally forgiven under the Chapter 7 bankruptcy protection he is seeking because those loans were the product of years of systematic fraud that Zayat allegedly orchestrated.

“The indebtedness owed by Ahmed Zayat to MGG is non-dischargeable as it is a debt for money, property, services, or an extension, renewal, or refinancing of credit, that was obtained by false pretenses, false representations and/or actual fraud within the meaning of Bankruptcy Code Section 523(a)(2)(A),” MGG stated in a Dec. 4 complaint filed in United States Bankruptcy Court, District of New Jersey.

“[I]t is a debt…that was obtained by use of a series of statements in writing that were materially false, respecting an insider’s (Zayat Stables) financial condition, on which MGG reasonably relied, and that Ahmed Zayat caused to be made or published with the intent to deceive MGG,” the complaint continued. “[I]t is a debt for willful and malicious injury caused by Ahmed Zayat to the property of MGG within the meaning of [the] Bankruptcy Code.”

The specifics of MGG’s fraud allegations against Zayat are not new. They were just introduced in a different court in a different legal context.

In fact, the “adversary proceeding” that MGG filed Dec. 4 covers the nearly identical timeline of alleged deceit and evasion involving racehorses and bloodstock between 2016 and 2020 that MGG first brought to light in January in its Kentucky lawsuit in Fayette Circuit Court.

That case revolves around accusations that Zayat hid the proceeds from the sale of nine lifetime breeding rights shares to 2015 Triple Crown winner American Pharoah, plus at least 15 other “valuable racing Thoroughbreds” that had been pledged to MGG as loan collateral.

Also Dec. 4, in a separate status report filing related to that case, the court-appointed receiver who has been managing and liquidating Zayat Stables reported that the operation is down to just three remaining horses after nine sold at public auction in November, grossing $566,000.

The MMG suit is one of at least three intertwined and currently active court cases involving Zayat and his racing stable.

Separately, in a federal Chapter 7 bankruptcy petition filed Sept. 8 by Zayat himself, horse farms, trainers, bloodstock businesses, veterinarians and equine transportation companies were among 132 entities listed as creditors.

Zayat stated they are due $14.7 million in “non-priority unsecured claims,” which means they are at the bottom of the hierarchy to get paid–if they get paid at all–if the plea for bankruptcy protection gets granted. This is the bankruptcy case that MGG is now trying to influence with its Dec. 4 adversary proceeding.

Complicating matters further, Zayat’s personal voluntary bankruptcy pleading is different from a separate involuntary bankruptcy petition that Zayat’s former financial advisor and other entities initiated against his racing stable Sept. 14.

Involuntary bankruptcy proceedings are relatively uncommon, and are generally designed to protect creditors as opposed to debtors. Involuntary bankruptcies are often filed against companies (as opposed to individuals) as an attempt to get paid when it is believed that a firm is rapidly burning through assets and/or financial malfeasance is alleged.

MGG’s Dec. 4 complaint pertaining to Zayat’s Chapter 7 petition demanded entry of a judgment declaring that he “is personally liable for all of the indebtedness owed to MGG under the Loan Documents in an amount to be determined by this Court and that such indebtedness owed by Ahmed Zayat is determined to be nondischargeable pursuant to [the] Bankruptcy Code [while] awarding MGG such other and further relief as this Court deems appropriate.”

The filing continued: “For several years, Ahmed Zayat’s fraudulent scheme worked for his benefit. In light of the fraudulent sales of MGG’s Equine Collateral, the concealment of sales revenue relating thereto, the manipulation of accounts payable, and the nondisclosure of Defaults and Events of Default under the Loan Documents by Zayat Stables…MGG was intentionally deceived and kept ‘in the dark…’

“As a result, MGG was defrauded of the opportunity to accelerate its Loans at or before the time when these fraudulent actions were occurring, thereby enabling Ahmed Zayat to continue to orchestrate the wrongful sale of additional Equine Collateral and further deprive MGG of the ability to insure that such sales realized fair market value and that the proceeds thereof were applied in accordance with the Loan Documents.”

MGG’s Dec. 4 filing also stated that “This Complaint is not intended to supersede or modify any of MGG’s claims against Ahmed Zayat or any other party asserted in the Kentucky [lawsuit]….

“Pursuant to this Complaint, MGG is setting forth the grounds on which it objects to the dischargeability of debts owed by Ahmed Zayat to MGG, and is preserving its right to have the claims against Ahmed Zayat set forth in the Kentucky [lawsuit] consolidated with the claims set forth herein at such time as the issues relating to the Kentucky [lawsuit] are ripe for further discussion by this Court.”

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