The personal bankruptcy trustee led by Ahmed Zayat, who raised and lobbied US champion Pharoah to win the Triple Crown in 2015, has asked the bankruptcy court to approve a settlement of his rights to any property. The estate went bankrupt on June 7.
Chapter 7 bankruptcy is about debt relief, not restructuring. As trustee, Donald V. Biase was tasked with overseeing the liquidation of Zayat’s assets and payments to creditors. Biase is asking for approval of a settlement that requires a $1.5 million payment to his office, primarily for the benefit of creditors. This amount does not include security claims that may or may not be enforceable in circumstances outside of the bankruptcy context.
The schedule in Zayat’s Chapter 7 bankruptcy petition names more than 100 creditors, nearly $1.9 million in assets, and more than $19 million in liabilities. According to Biase’s filing with the court, the source of the settlement payment, $1.5 million, would be paid by Sherif Zayat, Zayat’s brother.
In exchange for the payment, Biase will refute the charges he brought against Zayat to block his discharge in bankruptcy based on allegations of misconduct as well as a dispute with Sherif Zayat and Zayat’s children; a claim against ownership in the Zayat mansion in Teaneck, NJ; claims for mortgages deemed “avoidable,” or set aside, known as Sherif Mortgages, Leicht Mortgages, and Karasick Mortgages against residence; claim personal property of certain value at the place of residence; a claim against ownership in a farm in Egypt; and other potential requirements.
A hearing on the motion before Judge Vincent F. Papalia of the United States Bankruptcy Court for the District of New Jersey is set for July 6. Objections must be filed and served on the trustee at least. at least seven days before.
Biase argued that the proposed settlement of the case was “within the reasonable range”, fair and in the best interest of the bankruptcy estate.
Zayat filed for bankruptcy protection in September 2020 amid a spate of civil lawsuits filed in Kentucky, including fraud allegations against him and his son, Justin Zayat. Chief among his personal fortunes at the time was a New Jersey mansion, valued at $4.5 million by Coldwell Banker and an appraiser at $3.575 million. Personal property at the residence is worth approximately $79,000 if forcibly sold.
First and second mortgage claims on the property, undisputed by Biase, totaling $3.4 million; Linda Kasarick claims to owe $125,000 on a third mortgage; Andrew Leicht claims a $400,000 first mortgage, which is being litigated by Biase; and Sherif Zayat claimed a $500,000 mortgage recorded less than a month before Zayat filed for bankruptcy.
Zayat’s wife did not participate in the bankruptcy filing and owns half of the New Jersey residential property. Biase reasoned that even if the property were valued and sold for $4.8 million, and assuming the disputed mortgages were dropped, after paying two undisputed mortgages and broker’s commission, leaving only $1.16 million in equity, with Zayat’s interest worth half that amount, or $580,000.
Ahmed Zayat at Keeneland
Zayat Personal Bankruptcy is separate from the Zayat Stables bankruptcy case, of which MGG Investment Group is the principal creditor after lending Zayat $30 million for Zayat’s racing and livestock operations in 2016 and received a judgment of more than $24 million in Fayette Circuit Court in Lexington, Ky., in 2020. The lawsuit in that case lists approximately $4 million in assets, secured debt as being $22 million and another $4 million in debt.
MGG recently complained to Papalia that an agreement it reached earlier this year in the Zayat Stables bankruptcy case was derailed in favor of the settlement of Zayat’s personal bankruptcy and asked the judge mediation or facilitate mediation to resolve the issue. Papalia requested a phone conference to take place today between the attorneys, but since this story was published, court records do not show Papalia has taken any of the actions requested. .
Among the creditors named on Zayat’s personal bankruptcy application are eight trainers: Rudy Rodriguez (debt stated as $394,437); Richard Baltas ($316,070); Bob Baffert ($227,884); Brad Cox ($194,836); Todd Pletcher ($125,560); Mike Maker ($120,922); Steve Asmussen ($102,541) and D. Wayne Lukas ($8,157).
Among the many other debts listed on the bankruptcy schedule is $57,000 owed to Lexington-based Rood and Riddle Clinics, including a portion of various debts owed to various veterinary clinics across the country with total amount $390,000. Brook Ledge Horse Transportation was sold for $163,000.
Zayat’s personal bankruptcy filing lists six attorneys as counsel in his filing. Biase was represented by eight attorneys in various stages of the case, including attorneys based in New York City, Miami, various locations in New Jersey, and Cairo, Egypt.
