This letter from counsel for the EPB liquidation trustee directly rejects Qenta’s implied plan to liquidate precious metals and securities it received under the PAA. The trustee’s position is blunt: these are customer-owned assets, and Qenta cannot dispose of them without individualized, written customer direction and any required regulatory authorization. The letter also flags the subsidiary issue, warning that Qenta cannot casually “cancel” acquisitions of separate legal entities without following governing law. It is a formal notice that the “we can do what we want with the assets” narrative is not just wrong, it is contested on fiduciary and regulatory grounds.
But the reply was improper because it failed to demand the immediate return of all of the bank’s assets in kind, without any offsets, which is what was required by the Purchase and Assumption Agreement. The only thing the bank owed Qenta was the return of Qenta’s $500,000 down payment. If Qenta believed it was damaged by the bank’s breach, the Agreement required such a dispute to be settled by New York arbitration. The agreement was also clear that each party would bear its own costs in attempting to complete the transaction.
In addition to failing to demand that Qenta return the bank’s property to the bank, so that the receiver could secure the return of those assets to customers, the receiver left the responsibility of returning those assets to Qenta. But it was clear to me that Qenta would not return those assets, and that individual customers, unlike the bank itself, were not well positioned to legally force Qenta to do so. So Qenta was able to leverage the receiver’s abdication of his fiduciary duty to simply keep for itself assets that belong to some customers, and shake down others who may have been owed enough to file a lawsuit by offering them pennies on the dollar to walk away.