Bankruptcy protection does not preclude regulatory action. Some regulators come forward via the United States Trustee Program, a component of the United States Department of Justice responsible under federal law for the administration of bankruptcy cases and private trustees. Regulators can also raise concerns to the Bankruptcy Courts directly.
Recently, the United States Department of the Treasury's Office of Foreign Assets Control (OFAC) issued a Finding of Violation against the B Whale Corporation - a company based in Taipei, Taiwan. B Whale Corporation was a member of the TMT Group of shipping companies that had sought bankruptcy protection in Texas.
OFAC determined that, from on or about August 30, 2013 to on or about September 2, 2013, B Whale Corporation received over two million barrels of condensate crude oil from a ship-to-ship transfer off the coast of Iran made by an Iranian vessel that was, at the time, listed on OFAC's list of Specially Designated Nationals and Blocked Persons.
OFAC determined that B Whale Corporation was a U.S. person within the scope of the Iranian Transactions and Sanctions Regulations at the time that the oil transfer occurred because the company was present in the United States within the scope of the Regulations due to its bankruptcy filing made in the United States Bankruptcy Court for the Southern District of Texas on June 20, 2013. OFAC further concluded that the vessel M/V B Whale was subject to U.S. sanctions regulations because it was under the jurisdiction of a U.S. bankruptcy court, and therefore the oil transferred to the vessel was an importation from Iran to the United States as defined in the Iranian Transactions and Sanctions Regulations.
A news article reported that the matter may have come to OFAC's attention through allegations made by a creditor in filings in the bankruptcy. We have located the filings and can share copies. In the United States bankruptcy filings are generally a matter of public record.
OFAC's regulatory action should be viewed as a positive sign by foreign creditors and investors. Concerns over violations of U.S. regulations can be raised in bankruptcy court, and addressed by regulators.