New Court Filings in Zayat Bankruptcy Proceedings

The trustee overseeing owner, breeder Ahmed Zayat's personal bankruptcy proceedings made several court filings Tuesday to recover roughly $90,000 in allegedly fraudulent payments to various law firms.

According to the court filings, Zayat was insolvent at the time the transfers were made, and therefore, the law firms who are the defendants in the suits received more than they would have done through the Chapter 7 bankruptcy proceedings “had the Transfer[s] not been made.”

Trustee Donald Biase alleges in his court filings that the largest transfer of money Zayat fraudulently made was $42,812.32 to Rabinowitz, Lubetkin and Tully.

Zayat also made separate $20,000 payments to law firms Landrum & Shouse and Lavely & Singer respectively, and another $7,500 to Becker & Poliakoff, the suits allege.

Biase suggests that the monies stipulated might not be the total amounts Zayat allegedly paid to each company, his attorney writing in all filings that Biase is seeking to recover both the stipulated transfers “and such other Transfers that may be unknown to the Trustee.”

TDN reached out via email to each of the law firms listed as defendants in the filings but didn't hear back from any before deadline.

When reached by phone Tuesday, Zayat declined to comment.

This latest round of legal crossfire constitutes just the latest twist in a long, complicated and often-times convoluted war of financial attrition, as creditors have sought to reclaim millions from Zayat and his now-disbanded Thoroughbred racing and breeding stable, one most famously attached to 2015 Triple Crown winner American Pharoah.

In his own Chapter 7 filing in 2020, Zayat admitted to owing some $19 million to 132 non-secured creditors, the majority of whom consisted of Thoroughbred trainers, horse farms, bloodstock businesses, veterinarians, and equine transportation companies.

Towards the end of last month it appeared as though events had drawn to a close with the approval of two settlement plans in separate bankruptcy cases. Neither settlement delivered significant compensation to these 132 non-secured creditors though.

In Zayat's personal bankruptcy case, the trustee in June negotiated a $1.5 million settlement to be paid by the debtor's brother, Sherif Zayat, one which allows Zayat and his family to continue to live in an eight-bedroom, 7,714-square-foot home in Teaneck, New Jersey, that is currently assessed at $2.6 million.

In July, the court-appointed trustee in the involuntary bankruptcy case negotiated a settlement in which Zayat and his family members divvy up $5 million between MGG Investment Group and the trustee.

MGG is the lender that alleged in a 2020 lawsuit that Zayat and his family members fraudulently obtained $30 million in loans, then never repaid a large chunk of that debt.

Of that Zayat Stables settlement, only $30,000 was earmarked for the unsecured creditors who are legally much further down the payment ladder of priority.

In each of the court documents filed Tuesday, Biase seeks judgment against the defendants “for the avoidance and recovery” of the amounts allegedly transferred, for the defendants “to immediately pay to the Trustee the sums owed,” the interest owed and costs of suit, and “for such further relief as the Court may allow.”

The post New Court Filings in Zayat Bankruptcy Proceedings appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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Zayat’s Brother Ordered To Comply With Subpoena, Or Risk Contempt

Judge Vincent Papalia has ordered Ahmed Zayat's brother, Egyptian businessman Sherif El Zayat, to comply with the court's subpoena to turn over documents relating to the family's businesses and finances, reports the Thoroughbred Daily News.

Since Sherif El Zayat is not a U.S. resident or citizen, the order stipulates that if he does not comply with the subpoena, the court will hold him in contempt, requiring U.S. Marshalls to detain him upon U.S. arrival.

The trustee in the bankruptcy case, Donald V. Biase, believes that Ahmed Zayat has assets in Egypt being controlled by his brother. Biase wrote in a July filing: “Documents obtained by the trustee from third parties strongly suggest that the debtor still possesses significant assets in Egypt.”

Ahmed Zayat, best known in horse racing as the owner of 2015 Triple Crown winner American Pharoah through his Zayat Stables, filed for Chapter 7 bankruptcy protection on Sept. 8, 2020. Zayat and his racing operation were previously named in a civil lawsuit in Fayette County Circuit Court from New York investment firm MGG Investments, stemming from a $30 million loan he took out in 2016. MGG won a summary judgment in the amount of $24.5 million.

The post Zayat’s Brother Ordered To Comply With Subpoena, Or Risk Contempt appeared first on Horse Racing News | Paulick Report.

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Zayat Bankruptcy Trustee Alleges ‘Ongoing Pattern of Delay, Obstruction, and Gamesmanship’

Ahmed Zayat's attempt to get out from under $19 million in debt has reached yet another–and purportedly intentional–legal bottleneck.

The trustee assigned to the case is now alleging that three children and the wife of the financially strapped owner and breeder of Triple Crown champ American Pharoah are refusing to cooperate in providing documentation the trustee had subpoenaed from them to try and trace millions of dollars in possibly fraudulent transfers.

“[T]he Trustee's investigation reveals that the Debtor and his family members have engaged in a pattern of intermingling of assets and ongoing financial transactions among themselves,” the attorney bankruptcy trustee Donald Biase wrote in a July 13 filing in United States Bankruptcy Court (District of New Jersey).

“Notably, the [Zayats] have made only paltry productions in response to the subpoenas directed to them. Worse, their counsel has engaged in extensive redactions of the bank account statements they did produce based upon nothing but their own unilateral determinations of relevance, and has also simply omitted bank records for important periods,” the filing continued.

Ahmed Zayat's case seeking Chapter 7 bankruptcy protection has now dragged past the 10-month mark and has been hallmarked by the trustee's multiple allegations of stalling, evasion and non-cooperation. Zayat has repeatedly denied those claims via court filings.

The primary role of a court-appointed trustee in a bankruptcy case is to ensure that a debtor who files for federal bankruptcy protection is not hiding assets that could instead be used to pay creditors–many of whom in Zayat's case are Thoroughbred trainers for his now-liquidated racing stable and various racing- and bloodstock-related entities.

An objection to a bankruptcy protection plea can be filed if a trustee believes aspects of the required documentation 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.

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.

Back on June 4, the trustee issued a Rule 2004 subpoena to Zayat's wife, Joanne Zayat, and three of their four children, Emma, Benjamin and Justin Zayat. A business entity controlled by Justin, JPZ Holdings, LLC, was also subpoenaed.

Federal Rule of Bankruptcy Procedure 2004 authorizes the Trustee to investigate the “acts, conduct, or property or to the liabilities and financial condition of the debtor, or to any matter which may affect the administration of the debtor's estate, or to the debtor's right to a discharge.”

Specifically, the trustee wanted to see detailed information from the family's allegedly intermingled accounts with banks, credit card companies, other lending-related institutions.

The subpoena also wanted access to four TVG betting accounts “belonging individually to or jointly with, including as an additional or authorized user…any member of the Debtor's Family…or JPZ Holding,” as well as any passwords associated with such accounts.

On June 23, the four above-named Zayat family members (the “movants”) asked the court to quash the trustee's subpoena, alleging that “Each Subpoena is exceptionally broad and seeks wholesale financial records and other personal and proprietary financial information regardless of whether it has any relationship whatsoever to the Debtor or the Estate.”

In the trustee's July 13 memorandum in opposition to that proposed quashing, Biase contended that the motion to quash “is an exercise in gamesmanship, obstruction, and delay…. [T]hree of the Movants [Justin, JPZ Holdings and Joanne] were tied especially closely to the finances of the Debtor and to Zayat Stables.”

The filing continued: “Justin Zayat was the President of Zayat Stables, and so far as can be determined his sole source of income during the relevant period was Zayat Stables. Justin Zayat was also the beneficiary of nearly $1 million in transfers at a time when the financial condition of the Debtor and Zayat Stables were deeply troubled. Justin Zayat's company, JPZ Holdings, has also received millions of dollars in payments from the Debtor's brother and creditor, Sherif Zayat.

“Joanne Zayat, the Debtor's wife, was the recipient of over $1 million dollars of direct transfers from Zayat Stables. She is jointly named on every material bank account used by the Debtor, and is also a joint account holder with Justin Zayat.

“The accounts of Justin Zayat, Joanne Zayat and JPZ Holdings have been and are continuing to be used by the Debtor's brother, Sherif Zayat, to pay the Debtor's claimed $72,000 in monthly expenses. Joanne Zayat was also directly involved in obtaining loans from close friends and acquaintances for the benefit of the Debtor and/or Zayat Stables, and she has recently been repaying one of those creditors out of a bank account held in the name of her speech pathology business.

“In short, if the Trustee is to understand the conduct and financial transactions of the Debtor, he must necessarily obtain financial information relating to these third parties,” the filing contended.

The trustee further argued that the subpoenas at issue “are not only fully justified, but many are made necessary because the Debtor himself refused to produce records from a number of the financial institutions at which he has accounts.”

Biase explained the convoluted process by which Zayat, during the course of his bankruptcy plea, even directed the Trustee to serve his own financial institutions with subpoenas, “only to then have the Debtor's family members then move to quash those very subpoenas….”

“The Trustee's investigation also has revealed a substantial number of misstatements and omissions in the Debtor's bankruptcy schedules that were only uncovered through the issuance of Rule 2004 subpoenas to third parties, including overstatements of outstanding debt totaling hundreds of thousands of dollars.

“It is this ongoing pattern of obstructive activity, coupled with the Debtor's shifting and highly questionable statements in his schedules…that more than justified the Trustee's issuance of the subpoenas at issue. That same ongoing pattern of delay, obstruction, and gamesmanship requires that the Motion be denied in its entirety,” the filing stated.

The post Zayat Bankruptcy Trustee Alleges ‘Ongoing Pattern of Delay, Obstruction, and Gamesmanship’ appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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Trustee Alleges Zayat Transferred $200K+ Just Before Bankruptcy Filing

In an effort to claw back at least $200,000 in transfers by Ahmed Zayat that allegedly constitute “fraudulent conveyance” because they occurred just prior Zayat's filing for Chapter 7 bankruptcy protection, the trustee in charge of vetting Zayat's case filed two complaints in federal court Wednesday that aim to recover that money so it might instead go toward paying creditors.

Zayat claims to be $19 million in debt, and a massive chunk of that money is owed to Thoroughbred-related individuals and entities.

According to documentation filed Apr. 21 in United States Bankruptcy Court (District of New Jersey) by trustee Donald Biase, “The Transfer[s] were made with actual intent to hinder, delay, or defraud creditors of the Debtor.”

As an exhibit, Biase attached a copy of a Sept. 3, 2020, domestic wire transfer for $175,000 between two law firms.

Zayat's name is not listed on that TD Bank document. But the trustee, presumably through forensic accounting practices, is alleging that “the Debtor's books and records disclose” that Zayat orchestrated the transaction, which was allegedly made “without the Debtor receiving a reasonably equivalent value in exchange.”

The recipient of the money was listed as Cohen Tauber Spievack & Wagener, a New York-based law firm. According to a posting from 2015 on that company's website, the firm has represented Zayat in court and “advises Zayat Stables on transactional matters and sponsorship deals related to American Pharoah.”

The timing of that $175,000 transaction is notable because five days later, Zayat filed his petition for bankruptcy protection, signing off on paperwork that alleged he only had $314.22 to his name.

In a separate court complaint, the trustee also wants $28,848 back from New York University (NYU) that Zayat allegedly paid to the school within 90 days prior to his bankruptcy filing.

Zayat has four children, and they all either graduated from or are/were attending NYU. The youngest of the siblings, Emma, just enrolled at the school in 2020, according to her LinkedIn profile (Emma was the inspiration for the name of Littleprincessemma, the dam of American Pharoah).

Even if that money was paid for tuition or a pre-existing debt, the complaint states that (among a list of other legal reasons) the trustee can try to reclaim those funds because “the Debtor was insolvent at the time and [NYU] had reasonable cause to believe that the Debtor was insolvent.”

In the cases of both allegedly fraudulent transfers, the trustee is going after the money not by chasing Zayat himself for it, but by listing both the law firm and NYU as defendants, meaning they would be on the hook for repayment if the judge rules in the trustee's favor.

The post Trustee Alleges Zayat Transferred $200K+ Just Before Bankruptcy Filing appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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