To The Moon

Setting up a family trust has long been one of the favorite wealth management tools for the wealthy due to its advantages in asset segregation, debt risk avoidance and family wealth inheritance. However, Zhang Lan's overseas family trust was breached mainly due to her improper handling of trust assets, giving creditors an opportunity to take advantage.

After South Beauty's failed bet years ago, European private equity firm CVC Capital Partners (hereinafter referred to as CVC) never repaid its debts. CVC filed a lawsuit through arbitration claiming that Zhang Lan's family trust was "in name only and without substance," with Zhang Lan still being the actual controller. The court ordered the appointment of a receiver over Zhang Lan's trust and received support from the Singapore court. As a result, Zhang Lan's overseas trust was breached and the money in the trust would have to be used to compensate CVC for its losses.

On March 3rd, the United States District Court published a civil judgment between La Dolce Vita Fine Dining Company Limited and Zhang Lan. The judgment ordered that all proceeds from the sale of apartment 39A at 20 West 53rd Street in New York under Zhang Lan and her company be owned by La Dolce Vita Fine Dining Company Limited. In fact, La Dolce Vita Fine Dining Company Limited was established by CVC for the acquisition of South Beauty. The judgment also revealed that Zhang Lan lost her lawsuit against CVC in 2019 and owed them $142 million plus interest.

In order to recover $142 million in arrears, obtaining funds from selling New York apartments is only part of it; CVC also targeted Zhang Lan's overseas family trust. On February 2nd 2014, Zhang Lan's family trust shell company Success Elegant Trading Limited (hereinafter referred to as "SETL") was established; on June 3rd 2014 an offshore trust called The Success Elegant Trust was established on this basis with her son Wang Xiaofei and his children as beneficiaries and AsiaTrust Limited as trustee.

In November 2022, a judgment disclosed by Singapore High Court revealed details about Zhang Lan's overseas trust. Notably in this judgment Singapore High Court judge determined that: Zhang Lan is actual owner of assets in bank account where trust is located thus agreeing with plaintiff i.e., CVC’s application for appointment of receiver. This means that offshore trusts originally used for asset segregation were breached; Zhang Lan was recognized as actual controller; family trust property recognized as personal property belonging to Zhang Lan so naturally creditor CVC can apply for corresponding enforcement measures against these funds. This offshore family trust’s asset segregation function failed.

Lawyers believe that main reason why Zhang Lan’s offshore trusts were breached is because she had unlimited control over trusts’ property could retrieve dispose at will using trusts’ property satisfy her own interests while trustees other beneficiaries had no ability intervene at all. In offshore trusts this situation usually considered holding on behalf using name of trusts false arrangement so when encountering external debts divorce inheritance disputes very likely pierced recognized as actually belonging principal can used pay off debts or divorce inheritance division.

The judgment also revealed source destination offshore family trusts between December 16th 2013 June 13th 2014 plaintiff i.e., CVC transferred about $250 million into account $GAIN Capital(GCAP)$ under name Zhang Lan subsequently between March July value $142 million cash securities transferred Swiss Credit Bank account under name SETL then another $85 million transferred Deutsche Bank account under SETL currently SETL has about $22 million $33 million assets respectively $Credit Suisse Group AG(CS)$ Bank $Deutsche Bank AG(DB)$ accounts but already frozen Singapore High Court March.