Picken: Quite clear that SWIFT messages were not real
The High Court has granted a leading bank summary judgment on an “inherently implausible” €1.4bn (£1.2bn) claim for an introduction fee brought by a US law firm.
Mr Justice Picken found [1] the evidence supporting the claim by small Californian practice Verdi Law Group to be “inauthentic”.
Verdi claims that, together with another company, it acted in early 2021 as exclusive introducing parties in respect of a transaction under which BVL Capital 2021 Ltd was to obtain a stand-by letter of credit from Banque Paribas.
The letter was to be backed by over €500m in cash held by Sparx Asset Management with Banque Paribas. Deroyce Ltd would then use the letter to obtain credit to carry out leveraged trading in medium-term notes.
Verdi claimed that, although it did not itself invest in the venture, a non-recourse monetisation agreement made it entitled to a little over €1.4bn, with BVL receiving €1.7bn.
Banque Paribas’ defence was that the transaction was “a fiction”, with the stand-by letter of credit and various messages purporting to come from the bank fabrications.
Picken J said: “The Banque Paribas position, in short, is that this is a scam, and as a result Verdi’s claim is unsustainable… Who has engaged in the fabrication is a matter which, on Banque Paribas’ case, is unknown.”
Acceding to the bank’s application for summary judgment – it was the first of eight defendants – the judge said Banque Paribas had confirmed, “without contradiction in evidential form from Verdi”, that the Sparx account did not exist.
Further, it was “quite clear” that messages supposedly issued by the bank through SWIFT – the global messaging system for financial institutions – were “inauthentic”, with SWIFT’s general counsel confirming they were not made.
There was also “unanswerable evidence” that emails supposedly from the bank had been “spoofed so as to appear as though they have come from a legitimate Banque Paribas email address when, in fact, they have not”.
As a result, Picken J concluded, Verdi had no real prospect of succeeding on the claim.
Supporting this finding was the nature of the transaction. “The aggregate entitlement of Verdi and BVL would have been to some €3.15bn corresponding to an annualised yield for BVL and Verdi of over 600% of the original stand-by letter of credit sum of €500m.
“In those circumstances, the return for Verdi and BVL was nothing short of astounding. I agree with [counsel for Banque Paribas], in the circumstances, that it is inherently implausible that the transaction was authentic.”
Other aspects of the transaction also raised significant questions, such as the payments to Verdi and BVL not being dependent upon any trading being profitable “or, indeed, it seems on any trading taking place at all”, and Verdi’s supposed entitlement to €1.4bn being “out of all proportion to its alleged role in the transaction”.
Picken J added that Banque Paribas’ solicitors, City firm Bryan Cave Leighton Paisner, had sought to engage with Verdi and its solicitors, central London firm Mackrell, on the merits of the underlying claim for several months.
“Those efforts seem to have come to nought and that appears to be why the present application was issued.”