Zonda: Trustee Wants Up to €1 Million, Estate Has €167k
In the first weeks of martial law in Poland, Jerzy Urban, the government’s spokesman, was asked about Western sanctions and assured the press that the government would feed itself. The sentence outlived the system because it describes something larger than the People’s Republic: an institution created to manage scarcity begins by securing its own rations. It came back to me today while reading a document from the trustee of BB Trade Estonia, which reached creditors’ representatives a moment ago as an annex to the minutes of the meeting of 17 September. In it the trustee calculates his workload at 5,295 hours at EUR 189 per hour, which comes to a fee of EUR 1,000,755. In the second annex the same trustee reports that, according to the books at the end of March, the company held about EUR 167,000 with payment providers, and that he cannot confirm the money still exists. The two annexes sit side by side and do not comment on each other. In any other field this would be called a deficit. In bankruptcy it is called a calculation.
For the record: the trustee had to prepare the calculation, because the statute requires it, and it is not an invoice; the fee will be set by the court. Every line, however, carries the word “minimum”, and the document ends with a reservation that the whole is an estimate and may turn out lower, because a margin was built in. A minimum with a margin is a construction worth remembering.
What the meeting decided
By the day of the meeting 1,129 creditors had lodged claims worth EUR 23.7 million. Ninety-one creditors with EUR 11.6 million were represented in the room, in three groups; seventeen clients of my firm, with claims of EUR 7.2 million, held 62 percent of the votes present. The meeting approved the trustee, resolved to dissolve the company and elected a three-member bankruptcy committee, the Estonian counterpart of a creditors’ council, which supervises the trustee and whose consent he needs for transactions of particular significance to the estate.
Our majority would have allowed us to fill the committee with our own candidates. We voted instead for representatives of all three groups: the representative of the small creditors, the attorney from Magnusson, the firm that filed the bankruptcy petition, and me for the large creditors. Supervision with a single owner mostly supervises itself, and this company has had enough of that kind of control. The majority was used for one thing only: on our group’s motion the committee serves without remuneration, 9,507 votes for, 2,090 against. The votes against came from the Magnusson group, which had proposed paying the committee out of the estate.
What the trustee knows about the assets
As much as he knew in August. A loan to a company called Orion of EUR 75.1 million plus EUR 5.5 million in interest, of which the trustee writes that he has no documents allowing him to assess its value; a week ago I described here the loan agreement of 4 August 2022 and its 2024 amendment, so if the trustee does not have them, the committee will tell him where they are. Shareholdings in group entities booked at EUR 43.6 million, with the scope of the rights unclear. A trademark valued at zero, on account of, as the report puts it, its reputation. Liabilities of at least EUR 431.9 million, although the items listed in the report add up to EUR 431.4 million; the difference of EUR 523,938 is a rounding error at this scale, but in a document about the reliability of the books, rounding errors count double.
The most interesting part is where the numbers come from. The CEO told the trustee he has no access to the servers or the cloud, because Polish prosecutors have secured them, and that the accountant holds the documents. The accountant worked on data supplied by management, with no access to the exchange’s accounts, wallets or systems. The balance sheet showing EUR 346 million in crypto-assets is therefore a record of what management said, not an inventory. The trustee admits, honestly, that he cannot confirm a single item and does not rule out a crime. The subjunctive is compulsory in his profession; what worries me is that since August not one new, verifiable finding about the assets has been added.
A million euros, read carefully
Estonian law is better than the table looks. The trustee’s fee is set by the court after hearing the trustee and the committee, and it is calculated on the money that came into the estate through his efforts; money the company held on the day of the bankruptcy order does not count. Those EUR 167,000 are therefore not his base; his base is what he recovers. An hourly rate applies when the estate stays small regardless of the trustee’s work, and the trustee himself added at the end of the calculation that any increase in workload must then also increase the payments to creditors. That is his statement, not a provision of the law, which is exactly why the committee will keep returning to it: one’s own words are harder to retract than someone else’s.
The proportions say more than the total. Identifying crypto-assets, 600 hours; server data, 500; banks and exchanges, 300. But servicing the procedure and the creditors, correspondence, the list of claims, translations, notices, meetings, comes to 2,280 hours, 43 percent of the plan. Six hundred hours of correspondence across thirty thousand creditors is one minute and twelve seconds per person. Each further general meeting is 300 hours, or EUR 56,700; if three such meetings were charged against the EUR 167,000 in the books, there would be nothing left to pay for a fourth. Creditors do not need a trustee who writes back to them. They need a trustee who recovers, because only out of what he recovers will anyone receive anything, the trustee included.
Some of those hours can be reduced on the creditors’ side. We lodge our clients’ claims bilingually, in Estonian and English, with translations of the supporting documents, in the format of the trustee’s own instructions. A claim that needs neither translation nor supplementation feeds neither the “translations” line nor the “correspondence” line. It will not bring 400 hours to zero, but the committee will ask for a breakdown of that item to see what the real saving is.
The risk of abatement
An Estonian bankruptcy is financed from the debtor’s assets. When they no longer cover the costs, the trustee applies to have the proceedings closed. The documents do not say when; my own estimate is months rather than years, unless something real comes into the estate, and the candidates are known: the funds transferred in the spring to an address at the Kraken exchange, the Orion loan, the assets of the subsidiaries.
Closure is not automatic. The statute offers three ways out. A deposit by a creditor or a third party into the court’s account, in an amount set by the court: voluntary, not apportioned among the victims, and lost if the estate stays empty, which is why Estonian creditors rarely pay it. A public investigation: before the court closes the proceedings it must invite the Estonian Insolvency Service to apply for the case to continue at the state’s expense where there is a public interest, in particular a suspicion of crime. It is hard to name a bankruptcy that meets that test better. The route has a price: the powers of the creditors’ meeting and of the committee pass to the Service, and the state recovers its costs from the estate ahead of the creditors; in return, the Service can seek a business ban against the members of the management board. And the third way, the simplest and the hardest: recover the assets, because then the problem of costs solves itself.
What happens next
The committee serves without pay. On the day of the election the trustee received from me, with a copy to the court, a plan of several dozen actions: requests to banks and payment institutions for statements of every account since the company began trading, preservation of server and cloud data, identification of wallet addresses and their histories, an accounting of the Orion loan, and a list of questions for the CEO, not about a vast fortune but about specific transfers. The analysis of the money flows on the basis of that data my firm performs at its own expense and hands to the trustee; the estate should not pay twice for work it receives ready-made. Before the committee’s first session I am preparing a position on the calculation, tying the fee to recovered assets in line with the trustee’s own statement, and a submission to the Insolvency Service, so that the public-investigation route is ready before it is needed. The order is deliberate: first the data, then its cost, and only then the question of who pays. None of these steps guarantees a result. Each will be carried out and reported here.
Robert Nogacki is a Polish attorney at law (radca prawny), the founder and managing partner of Kancelaria Prawna Skarbiec (Skarbiec Law Firm), which has operated continuously since 2006.
The law is equal for everyone, but the parties rarely are: on one side stands an organization with time, money, and lawyers, on the other a person with one business, one nest egg, and one life.
Clients rarely come to him with a legal problem. They come with a problem that also has a legal side: an audit that began with a single invoice, money entrusted to someone who has disappeared, a company that has to be passed on before it is too late. Most such matters are decided long before the first letter is written, in decisions made without asking and in deadlines nobody remembered. So he begins by asking how the client got here, not what the client should have done.
He advises entrepreneurs and families from more than a dozen countries, including those whose accounts the tax office has just seized and who do not know what to do tomorrow morning. He defends them in tax audits, customs and fiscal inspections, disputes with the tax authorities, and criminal tax proceedings. He represents victims of investment fraud and Ponzi schemes. He helps families set up family foundations and plan succession, so that a life’s work outlasts a single generation.
Not every case can be won. Every case can be run so that the client knows where they stand. Since 2006 he has represented the victims in the WGI case (Warszawska Grupa Inwestycyjna, the Warsaw Investment Group), one of the longest criminal cases in the history of the Polish financial market, because some things must not be left half finished, even when they take two decades. In the case of the collapsed cryptocurrency exchange Zonda (Zondacrypto, operated by BB Trade Estonia OÜ), he represents several hundred victims in the criminal investigation conducted by Poland’s National Prosecutor’s Office and in the Estonian bankruptcy proceedings.
Kancelaria Prawna Skarbiec is listed in the rankings of Poland’s largest tax advisory firms published by Dziennik Gazeta Prawna and Rzeczpospolita, and it is a four-time recipient (2015 to 2018) of the European Medal awarded by the Business Centre Club and the European Economic and Social Committee. Robert Nogacki publishes regularly, in the press and on the firm’s website, for people who have a problem rather than a law degree, because a legal opinion the client cannot understand protects only the lawyer.
He believes that the best legal advice is the kind that means the client never has to appear in court.
