SMARTLYNX AIRLINES: Criminal Investigation Has Been Launched
A criminal investigation has been opened into suspected fraud involving the management of SIA Smartlynx Airlines and the alleged fictitious sale of the airline to a new owner. BLACKLIST.AERO learned this information from a source familiar with the investigation. The case was initiated after a complaint was filed with the police by one of the creditors. It is also possible that additional complaints have been submitted by other defrauded counterparties of Smartlynx.
The investigation is being conducted by the Economic Crimes Investigation Unit of the Latvian National Police. It is not excluded that Latvian investigators may later have to cooperate with law-enforcement authorities in Ireland and Lithuania. Their task will be to clarify how the airline accumulated debts of at least EUR 238 million, of which EUR 174.374 million is owed to companies belonging to the Avia Solutions Group ecosystem, while EUR 64 million represents debts to external companies.
BLACKLIST.AERO has also learned that Smartlynx CEO Edvinas Demenius departed for an “extended vacation” in Bali immediately after the Economic Crimes Investigation Unit expressed interest in him. BLACKLIST.AERO is attempting to obtain a comment from Demenius; however, he has blocked all attempts to contact him. We will be happy to publish his comment at any time.
Earlier, the administration of the Global Aviation Register of Defaulter Companies BLACKLIST.AERO questioned the transparency of the transaction in which the previous owner, Avia Solutions Group, sold Smartlynx Airlines to a newly formed entity — Stichting Break Point Distressed Assets Management, incorporated in the Netherlands just one month before the sale.
BLACKLIST.AERO discovered that the head of Stichting Break Point Distressed Assets Management — Cypriot lawyer Elias Heracleous — is a nominal owner or director of roughly 70 other companies, which further intensified suspicions that the transaction may have been fictitious.
The structure of Smartlynx’s debt also raises significant questions. In particular, the fact that three-quarters of the debt is owed to companies within the Avia Solutions Group. Law-enforcement authorities will need to determine whether ASG-affiliated companies (primarily ASG FINANCE DAC, which holds EUR 117,156,477.64 of the debt) artificially inflated the cost of their services to increase Smartlynx’s liabilities and thus present “paper profits” in the financial statements shown to holders of previously issued bonds.
BLACKLIST.AERO will continue to monitor developments surrounding the bankruptcy of Smartlynx Airlines and the events that follow.
Over the past week, investment analysts from companies holding Avia Solutions Group (ASG) bonds have contacted me twice, asking for a more detailed explanation of the SmartLynx bankruptcy. Their biggest concern is that the same situation could repeat with other companies within the ASG holding.
The covert bankruptcy—legally framed as a “restructuring”—of SIA SmartLynx Airlines (Latvia), along with the highly probable collapse of SmartLynx Malta and SmartLynx Estonia in the near future, has become more than just a landmark event for the aviation market. Its consequences may amount to a full-fledged default tsunami, triggering a cascade of multimillion-euro non-payments across the industry.
Every time I fly to Dubai for exhibitions, I witness the same scene outside the hotels. A Bugatti or Lamborghini pulls up to the entrance, the chauffeur steps out, and hands the wheel to someone walking out of the lobby. It looks predictable — after all, Dubai is exactly the place where many people dream of cruising down Sheikh Zayed Road in a hypercar, showing off status and wealth.
BLACKLIST.AERO is publishing a full list of creditors of SIA SmartLynx Airlines (Latvia). We got it from several sources at once. This list was sent to all creditors by the airline itself along with an official letter informing that SmartLynx started the creditor protection procedure.
