Lawyers for overseas creditors have won a victory over Australian businessman Geoffrey Edelsten in the Federal Court.
Colourful businessman Geoffrey Edelsten’s American bankruptcy has been recognised in his native Australia, preventing his homes and assets from being sold.
The Federal Court restrained Mr Edelsten from selling any of his Australian assets while the US bankruptcy investigation continues.
The move means overseas creditors can start to chase his Australian assets to repay their debts.
Court documents show Mr Edelsten owes $14 million to the Australian Taxation Office, as well as more than $10 million to his former US business partner, among 38 other creditors.
His estranged wife Brynne Gordon, who was in the Federal Court in Melbourne, gave a statement revealing Mr Edelsten had four Victorian properties, and others in NSW and Queensland.
Justice Jonathan Beach said the United States Trustee’s Australian representative now had permission to interview witnesses and collect evidence in Australia to support its case.
“All powers normally available to a trustee in bankruptcy appointed under the provisions of the Bankruptcy Act, (are to) be made available to the Australian representative,” Justice Beach said on Friday.
Mr Edelsten filed for bankruptcy in Ohio in January after business deals with Rafael Mawardi failed.
The pair met in Las Vegas, where Mr Mawardi ran a clothing shop, House of Nurielle.
They planned to take the chain global, diversifying into property development and running nightclubs, but their relationship soured.
Justice Beach said the rules of recognising a foreign proceeding in Australia in this case were “finely drawn”.
“That issue turns on where Mr Edelsten has the centre of his main interests,” he said.
Justice Beach said while Mr Edelsten clearly lived and did business in Victoria, he also did business across the globe.
He granted the application for a foreign proceeding, subject to conditions.
Justice Beach entrusted an insolvency administrator with Mr Edelsten’s affairs and put a stay on any legal proceedings against him while the US case was investigated.
He also added the ATO to the United States Trustee’s case.
Justice Beach said the ATO would be entitled to a distribution from Mr Edelsten’s Australian assets.
Mr Edelsten was not in court for the ruling.