EY hit with $1bn claim for one of the largest bankruptcies in Swiss history
EY’s Swiss practice is facing investor claims for giving clean audits to opaque conglomerate Zeromax for years before it collapsed, according to the Financial Times who first reported the news.
Zeromax, whose crash in 2010 made it the second-largest bankruptcy in Swiss history, made multimillion-dollar jewellery purchases and made irregular offshore payments – which the big four auditor approved.
EY’s Swiss partnership gave the company clean audits between 2005 to 2007, and continued to audit Zeromax for another three years, but did not disclose audit opinions on the company’s annual accounts, in the run up to its collapse.
Headquartered in Zug, Switzerland, Zeromax owned a business empire in Uzbekistan which accounted for almost 10 per cent of Uzbekistan’s gross domestic product.
When the company collapsed it left debts of over five billion Swiss francs (£4.4bn) with, creditors told the Financial Times, at least around £2bn worth of assets still missing.
US hedge fund Lion Point Capital, which reportedly acquired a tranche of Zeromax debt from the bankruptcy estate in 2019, is behind the $1bn lawsuit against EY, which it claims gave Zeromax clean audits while examining the company’s books and failing to raise the alarm.
The claim is the latest auditing scandal to hit the big four accountant, which has faced scrutiny for its role as auditor of Wirecard, the collapsed German payments company.
“Court decisions in Uzbekistan in 2010 caused a de facto expropriation of Zeromax assets and its bankruptcy,” EY Switzerland said in response to the reports.
“This matter is subject to ongoing litigation and EY Switzerland will vigorously defend its position to vexatious claims. We cannot comment further,” the company continued in a statement.