Assignment of Deposits in Failed Private Lender KTB (CCB) – Legal Transaction or Double Robbery?

Екип на Биволъ

In the last days before the anticipated revocation of the license of the failed private lender Corporate Commercial Bank (KTB / CCB) and the announcement of its bankruptcy, big depositors who have funds in their bank accounts over the guaranteed amount, under the Guaranteed Bank Deposits Act, were hit by a feverish panic and sought a way to minimize their losses because they don’t believe that with the encashment of the mass of the insolvency, their receivables will be restored even partially.

One of the conservators of CCB – Stanislav Lyutov (former trustee of the former national flag- carrier “Balkan” airlines) made a public statement that the assignments did not derogate the mass of the insolvency and that the bank is only a registrar of the wills to offset, as result, the concluded contracts for assignment. We believe that this is a misinterpretation of the truth and are offering an analysis of the actual scheme, under which transactions are conducted.

At present, mainly companies that are large corporate clients of CCB and have taken loans from it, such as “Dunarit” JSC, “Litex Motors” JSC and others, are benefiting from the offered assignments. The scale of the transactions is impressive. According to information that Bivol has obtained, only in one day, 50 million levs have been assigned, and the total amount is growing. We are assuming that it has already reached 1.5 billion levs, but exactly how much should be clarified by the administrators of the assets to be appointed by the central bank, the Bulgarian National Bank (BNB).

The tenders for the transfer of receivables are even officially announced online.

As one can see, the company “Genimex Invest”, owned by businessman Georgi Georgiev from the city of Lovech, is one of the biggest borrowers of CCB, obtaining an amount of 8.744,119 levs. The same goes for “Litex Commerce” and “Litex Motors”, under the control of Grisha Ganchev*, respectively 7,768,603 levs and 58,963,161 levs. These amounts come from an unofficial (but not disproved either) list of major borrowers of CCB at the end of 2013, published by the newspaper Capital in July this year

Until recently, Ganchev was partner of CCB majority shareholder Tsvetan Vasilev in the company “Petrol”, and after the closure of CCB, he officially took over the company and moved its headquarters to Lovech. “Dunarit” JSC, which owes 69,372,038 levs, is associated with Tsvetan Vasilev through Hedge Fund Investment and TC-IME.

Entrepreneurial managers and lawyers have created a strict organization that directs individual depositors to these companies to conclude contracts for the assignments of their receivables under extremely unfavorable conditions. According to testimony of depositors, they are directed to respective assignees by the currently ousted former managers of CCB. If one assumes that most of the debtors of CCB are individuals and companies connected to Tsvetan Vassilev, the subsequent controlled assignment and offsetting of obligations can be considered the second stage of the plundering of the depositors’ money.

Assignment (transfer of ownership to a new creditor) is established by Articles 99 and 100 of the Obligations and Contracts Act (ADA). In order for the new creditor to have motive and to benefit from this transfer, the price of this transaction must be lower than the actual amount of the assignment and in this case the possibility to execute an offsetting, within the meaning of Article 103 and following ones of the ADA, of the acquired receivables against the proceeds of any loan obligation to CCB. In such transaction, depositors of CCB, which in practice are its creditors, transfer their deposits, i.e. their receivables from the bank to its borrowers as a result of which the latter are new creditors of the bank, i.e., they have at the same time both payables and receivables with the bank and as such have the right to request their credit to be offset, i.e. reversed against their acquired rights to the deposits.

Bivol was able to obtain a contract for an assignment of “Litex Motors” JSC. Such contracts are offered to large depositors to assign their receivables from CCB. According to the document that we have, the payment by the assignee (Litex) to the assignor (depositor X) is conditional on the performance of the offsetting, i.e. of the will of the legal representatives (conservators or receivers or liquidators) of the third party, which in this case is CCB. It is important to realize that it is deferred for 18 months from the date of posting of the offsetting by the CCB, where a six-month grace period is agreed, during which the assignor will not be paid any amounts.

Assignment of Deposits in Failed Private Lender KTB (CCB) – Legal Transaction or Double Robbery?Assignment of Deposits in Failed Private Lender KTB (CCB) – Legal Transaction or Double Robbery?Assignment of Deposits in Failed Private Lender KTB (CCB) – Legal Transaction or Double Robbery?Assignment of Deposits in Failed Private Lender KTB (CCB) – Legal Transaction or Double Robbery?

It is also important to note that 18 months is actually a period of a year and a half in which the activities of the assignee may be terminated or transferred to another company and the original debtor company to be declared bankrupt. For example, the law allows for the possibility for the date of insolvency of the assignee to precede the date of all of his/her concluded contracts for assignment. Thus, quite “legally” and irrevocably, the hopes of the assignors to get back even part of their money from the new debtor may evaporate in thin air.

The mentioned contract expressly provides that the assignee does not owe interest to the assignor. There is also a stipulation that if within two months after the signing of the assignment, an offsetting, reflected in relevant banking operations, is not made, this contract will be deemed terminated reversely. This means that the assignee has no responsibility and all risk is assumes and carried by the assignor. Given that the latter does not participate in the offsetting and its implementation, then the process does not depend in any way on his/her own will, but on objective and subjective factors that are beyond his/her legal sphere. If one adds to these requirements the fact that the receivables of the largest investors were transferred in recent days at a price reversed by 40% to 60%, the picture becomes quite clear.

To illustrate the situation we offer the following example: You are a depositor (natural or legal person) in CCB with total deposits of 2 million levs, i.e. well above the amount guaranteed by the Bank Deposits Guarantee Fund. Under the law, you will be paid only 196,000 levs. In your panic not to lose the remaining 1.804 million levs and in order “to be able to receive something”, even though you are in a situation of “arm-twisting”, you decide to contact someone and ask what to do. Then, you inevitably fall in the “scheme” of the former subordinates of Vasilev (or they have already contacted you). You are advised that the only way out and for at least a partial salvation of your money would be to assign you receivables in the amount of 1.804 million levs to a CCB borrower at a price he/she will offer and which is inevitably lower than the value of your deposit. You are directed to visit the offices of the borrower company, where you see dozens of others in the same situation as you, already there and humbly waiting in line for their turn to transfer their deposits. When it is your turn, they explain to you that the assignor “buys” receivables with a 40%, 50% or even 60% discount, and after the price is recorded in the contract of assignment, someday “you will have to receive” from the assignor 721,600 levs instead of your 1.804 million levs. At the same time, the assignee becomes in turn a creditor of CCB with the rest of your own real money deposited in the bank!

What is the equation? For once, the bank has collected the funds of its depositors and has subsequently handed them to companies and individuals connected with its owners or managers. Much of the loans end up being unsecured, in other words they are straightforward “gifts”. Then, because of these vicious operations, the bank bankrupts, the money is gone because it was spent by the borrowers (not all loans are vicious, but so far the official information is for more than 4 billion levs). These borrowers, however, face a risk that after the bankruptcy they will still need to repay the loans, which become due and must be collected to improve the insolvency of the bank. These borrowers (associated with the management and shareholders of the bank), however, start the scheme of assigning deposits with your real money at a price 60% lower, and use these assignments to repay the outstanding (and already spent) money to the bank in bankruptcy. This is a classical scheme of double robbery with the help of the consistent inactivity, for years now, of the central bank BNB. An upcoming investigation of Bivol will reveal how and why BNB and other state institutions have been conscious collaborators in the criminal syphoning of CCB through unsecured loans to connected parties.

* Litex Motors is controlled by Grisha Ganchev, who is considered by former US Ambassador in Sofia, James Pardew, to be a figure of the Bulgarian organized crime. According to the secret diplomatic cable, which Bivol first published in full, “Litex’s illegal activities include petroleum smuggling, financial fraud and money laundering, and extortion and racketeering”.


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