Cytonn High Yield Solutions is allegedly on its knees after a court ruled that it pays back millions its defrauded creditors.
This comes after on November 30, 2024 the High Court of Kenya reinforced the liquidation process of Cytonn High Yields Solutions (CHYS) by upholding asset preservation orders, dismissing multiple applications that sought to lift restrictions on properties tied to the collapsed investment firm.
The ruling, delivered by Justice Alfred Mabeya, aimed at safeguarding the interests of investors and creditors who lost billions in the failed investment scheme.
Solutions (CHYS)had been placed under liquidation on January 6, 2023, with the Official Receiver appointed as the liquidator.
The firm, which managed some real estate investments, faced severe financial challenges, leading to claims from investors who had collectively invested over Sh13 billion.
To prevent the loss of CHYS assets, the court issued preservation orders, ensuring that properties under the firm remained intact for creditor compensation. However, several entities, including Cytonn Integrated Project LLP (CIP), Goal Advisory, and Cytonn Investment Management PLC (CIM), challenged these orders, arguing that their business interests were unfairly affected and that certain projects should be allowed to continue.
Justice Mabeya also ruled against lifting the preservation orders on key properties, including The Alma, Applewood, Taraji, and The Ridge, citing the need to protect creditor rights.
CIP had requested the court to permit the transfer of properties to buyers who had made payments before the orders were imposed.
However, the Official Receiver and opposing creditors argued that these developments were funded directly by CHYS, and lifting the preservation orders would compromise the liquidation process.
Similarly, Goal Advisory, representing regulated investors, contended that the asset freeze was harming its clients. However, the court found that the applicant failed to demonstrate that its appeal had legal merit or that it faced irreparable loss.
The court reaffirmed the doctrine of tracing, granting the Official Receiver authority to control CHYS – related assets and shares.
In his Ruling Justice Mabeya ruled that creditors had the right to trace their funds into assets acquired using CHYS investments. These included a 12.5% stake in Superior Homes (Kenya) PLC held by Cytonn Investment Partners Fifteen LLP (CIP 15) and multiple real estate properties under Cytonn Investment Partners Sixteen LLP (CIP 16).
“The greater prejudice in this matter would be to release the preserved properties or delay further the realization of the assets of the Company for the benefit of the suffering public,” Justice Mabeya stated in his ruling.
The ruling clears the way for the Official Receiver to proceed with asset valuation and realization, ultimately facilitating creditor compensation.
It represents a significant legal setback for Cytonn – affiliated entities that sought to retain control over the properties, as the court underscored its commitment to preventing asset shielding from rightful claimants.
While creditors welcomed the decision, entities such as CIP and CIM may consider appealing the ruling in an attempt to salvage their financial interests.
As the liquidation process moves forward, thousands of investors remain anxious about their prospects of recovering funds.
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