By T. D. Thornton
On the same day that the federal judge overseeing Ahmed Zayat's two intertwined bankruptcy cases ordered the 13th consecutive extension of time for the trustee poring over Zayat's racing stable finances to file a complaint objecting to the dischargeability of any debt, the company that services the mortgage on Zayat's $3.5-million New Jersey home on Friday filed a separate motion asking the court to remove the automatic stay on that property.
Such a request, if granted at a Feb. 1 hearing, could pave the way for the financial institution to initiate foreclosure proceedings against Zayat.
Citing the $1.86 million outstanding on the loan plus liens totaling $2.91 million, lawyers for Fay Servicing, LLC, wrote in a Jan. 7 motion in United States Bankruptcy Court (District of New Jersey) that “it is self-evident that the debtor lacks any equity in the subject property [and] the debtor has failed to make any showing that the property is required for reorganization under the Bankruptcy code.”
The filing specifically asks for relief “including but not limited to allowing [Fay] to enforce its remedies to foreclose upon and obtain possession of the Property.”
In a riches-to-rags case brimming with fraud allegations that has languished in federal court for an unusually long 16 months, the owner and breeder of Triple Crown champ American Pharoah is seeking legal clearance to get out from under $19 million in debt.
Many of those creditors are Zayat's former Thoroughbred trainers, plus numerous breeding, boarding, horse transportation and veterinary entities.
When Zayat first filed for Chapter 7 bankruptcy protection on Sept. 8, 2020, he wrote in court documents that he owned only $300 in cash and $14.22 in two checking accounts.
Yet he and his wife continue to own and live in a 7,714-square-foot home in Teaneck, New Jersey.
Six days after Zayat filed his personal bankruptcy claim, Zayat's former financial advisor and several other entities initiated a separate “involuntary bankruptcy” petition against Zayat's family owned racing stable.
Involuntary bankruptcy proceedings, although relatively uncommon in U.S. courts, are designed to protect creditors, not debtors, and are often filed against companies (as opposed to individuals) as an attempt to get paid when it is believed that a firm is rapidly burning through assets and/or financial malfeasance is alleged.
Donald Biase, the trustee assigned by the court to find out if Zayat is being truthful about his alleged state of impoverishment in his personal bankruptcy petition, has repeatedly told the judge in the case that Zayat and his family members are refusing to cooperate in his legal attempt to trace millions of dollars in possibly fraudulent transfers.
In July, Biase wrote in a court filing aimed at uncovering hidden assets that “Documents obtained by the trustee from third parties strongly suggest that the Debtor still possesses significant assets in Egypt.”
Zayat has repeatedly denied that he has engaged in any illegal activity or that he is hiding money. He has also insisted that neither he nor his family members are trying to hinder the work of either of the trustees who are assigned to vet his personal finances and business operations.
Beyond not having his Chapter 7 bankruptcy protection granted by the court if he isn't being truthful, Zayat faces a possible federal investigation and/or charges if the U.S. Department of Justice believes crimes have been committed.