Fraudulent transfers
Seacoast National Bank N.A. v. Alvarez
Date: Jan. 7, 2025
Issue: Whether food company Cargill Inc. engaged in fraudulent activities and breached fiduciary duties by misusing loan funds for Coex Miami’s coffee inventory purchases.
Case Summary: Seacoast National Bank sued food company Cargill Inc., alleging it engaged in fraudulent activities and breached fiduciary duties by misusing loan funds for Coex Miami’s coffee inventory purchases.
Seacoast, the successor to Professional Bank, provided loans to Coex Coffee International Inc. (Coex Miami), a company involved in buying and selling coffee. Coex Miami also used swap agreements with Cargill to hedge price risks for its coffee transactions. Under the direction of its principals, Ernesto Alvarez, and Ernesto Romero, Coex Miami requested “pre-export advances” from Professional Bank. These requests asked the bank to disburse funds from Coex Miami’s credit facility into its operating account and wire them to a specified supplier’s account. At other times, Coex Miami sent wire transfer requests to transfer funds directly from its account to the supplier.
Seacoast sued Cargill, Alvarez, and Romero, claiming the company improperly accepted $18,473,171 in transfers to cover Coex Miami’s debt obligations. Seacoast alleged that Cargill’s internal credit team reviewed financial statements from Coex Miami and Corporacion Coex Inc. (Coex Panama), which Alvarez and Romero controlled. In January 2020, Coex Panama’s financial review showed it exceeded its collateral threshold by over $8 million and would owe Cargill more than $16 million if the position were unwound. To address this, Cargill, Alvarez, and Romero agreed to raise Coex Panama’s collateral threshold to $14.5 million and had Coex Miami guarantee Coex Panama’s obligations up to $14.75 million.
According to Seacoast, Cargill knew Coex Miami was in a precarious financial position but continued to request that the company make multiple guarantees of Coex Panama’s obligations to Cargill. Seacoast claimed that Cargill “had actual knowledge of the highly leveraged nature of Coex Panama and … knew that Coex Miami did not have the requisite liquidity or funding sources to pay tens of millions of dollars in trading obligations.” Despite this, Romero and Alvarez allegedly agreed that Coex Miami would pay Cargill for Coex Panama’s obligation, even though Coex Miami lacked financial ability and had no business justification. In addition, Seacoast claimed that Alvarez and Romero, acting through Coex Miami, falsely and fraudulently told the bank that Coex Miami was purchasing coffee and needed to borrow funds. Coex Miami allegedly sent requests for pre-export advances and wire transfer requests to suppliers to carry out this scheme. Seacoast claims Cargill failed to provide notice, engaged in fraudulent transfers, and breached the covenant of good faith. It also accuses Cargill, Alvarez, and Romero of aiding fraud, with Alvarez and Romero allegedly breaching fiduciary duties that Cargill helped violate and all three conspiring to commit fraud.
Seacoast also claimed that Cargill breached its intercreditor agreement. The agreement required Cargill to notify the bank and other creditors at least ten days before realizing on collateral, accelerating debt or demanding payment from Coex.
Bottom Line: Cargill’s to Seacoast’s complaint is due Feb. 2, 2025.
Document: Complaint
