B.C.I. Finances Pty Limited - Case Update

The saga involving various companies owned by the ultra wealthy Binetter family (the Binetter Group) — the founders of Australian beverage company Nudie Juice — is continuing to play out in tandem before both the Australian and US courts.

We recently wrote about the fallout of an elaborate tax evasion scheme perpetrated by members of the Binetter family. In 2014, the ATO investigated various members of the Binetter Group and found that they had engaged in fraudulent lending arrangements with Israeli banks to claim false interest deductions. This resulted in an assessment of more than $100 million against the companies, and the ultimate liquidation of several members of the Binetter Group in 2014 and 2018, with John Sheahan of Sheahan Lock ultimately appointed as liquidator (but not initially over some of the companies). The liquidator has obtained judgments exceeding $100 million against members of the Binetter family and affiliated entities for breaches of fiduciary duty. He has also obtained recognition of the Australian liquidation proceedings under Chapter 15 of the US Bankruptcy Code.

In the US recognition proceedings, the liquidator sought discovery from three members of the Binetter family — Michael Binetter, Andrew Binetter and Samantha Binetter-Kelliher — with the goal of tracing diverted assets and pursuing potential claims against the Binetters and various third parties, including banks and accountants that may have facilitated the alleged misconduct.

The Binetters opposed the motion, citing a 2018 global settlement agreement which included broad releases of claims against the Binetter family and their businesses. They argued that this agreement barred any further claims by certain of the companies in liquidation. Mr. Sheahan contended that because he was not yet liquidator of the relevant companies at the time of the agreement, the releases should not bind him.

The US Bankruptcy Court for the Southern District of New York ruled that the discovery should be allowed for two main reasons: (1) the enforceability of the release is still in question and being determined in an ongoing Australian case before Justice Cheeseman, who ruled that discovery should be allowed to proceed pending resolution the case; and (2) even if the release is enforceable, discovery could identify claims against third parties, such as banks or accountants.

However, the Court deferred the issue of whether the Binetters should have to produce their tax returns, saying a proper ruling on that issue should wait until other documents are produced and it can be determined how essential the tax returns are in light of the rest of the production.

Read the decision here.