BTA files motion to dismiss fraud lawsuit in US

Kazakhstan’s BTA Bank has filed a motion to dismiss the lawsuit filed by its creditors in the United States, Tengrinews reports citing the bank.

The bank confirmed that the lawsuit was indeed filed in August 2013. "However, the official presentation by the plaintiffs to the counselor with the consent of the court was made only in March 2014… On April 22, 2014 the consultants acting on behalf of the financial institution (BTA) filed a motion to dismiss the case," the bank said.

BTA Bank defaulted in 2009. In September 2010 BTA Bank completed the first restructuring of its debt. As a result, the bank’s debt was slashed from $16.65 to $4.2 billion. After the restructuring it is controlled by Samruk-Kazyna state fund (81.48 percent), where as the bank’s creditors received a little over 18 percent in the bank.

The first restructuring was followed by the second one after the bank defaulted on its $150 million coupon payment in January 2012. As a result of two restructurings BTA Bank’s debt cut by 70 percent.

After BTA bank finished restructuring its debts in 2010, its creditors appealed to the federal court in New York claiming that a debt securities fraud had taken place. The plaintiffs - Atlantica Holdings, Inc., Baltica Investment Holding, Inc., Blu Funds, Inc., Allan Kiblisky, Anthony Kiblisky, and Jacques Gliksberg - filed the lawsuit in August 2013 alleging that BTA Bank violated the Securities Exchange Act of 1934. They claimed that they and other creditors were misled when invited to purchase debt securities of the bank worth tens of millions of dollars in the course of restructuring of the bank's debt.

The creditors insist that the information released by the bank at the time was false. They also did not rule out that the main shareholder of the bank - Kazakhstan's National Welfare Fund Samruk Kazyna was also involved in the fraud, so they filed a claim against the fund in December 2012 in the United States. The plaintiffs allege that the “real purpose” of BTA's restructuring was to enable Samruk Kazyna to withdraw millions of dollars from BTA Bank at the expense of the creditors.

The lawsuit is considered in the United States rather than in Kazakhstan, because the plaintiffs used their right under the Federal Rules of Civil Procedure to ask for permission to serve BTA Bank through its counsel in New York, White & Case LLP on October 1, 2013. Since the firm represented the bank in connection with the restructuring and bankruptcy proceedings the court granted the monition in March 2014.

One of the partners of the firm affirmed the motion of Samruk Kazyna to dismiss the lawsuit filed against the Fund. The lawsuits filed against BTA Bank and the Fund are the same, but they were filed at different time, because when the bank defaulted and was undergoing the second restructuring it was protected from prosecution.

Reporting by Azhar Ashirova, writing by Dinara Urazova, editing by Tatyana Kuzmina