Sinobec: a worldwide freeze, and the monitor's hand on the cheques

When Sinobec Group filed for protection under the CCAA in May 2025, it described itself as a North American niche aluminum supplier founded in Montréal more than twenty years earlier: sheets, coils, billets, ingots and extrusions sourced abroad and sold to more than 600 customers, alongside a side business in shower doors, railings and awnings. It had approximately 76 employees, 16 distribution centres and warehouses and sales offices in five countries, per the Application for a First Day Initial Order, May 23, 2025, paras. 2–4. Its account of the collapse was the aluminum market after the pandemic, high interest rates and, in early 2025, U.S. tariffs on Chinese goods that reached 145% in some cases; it said it was owed significant receivables "from clients dealing with Chinese importers who have arbitrarily ceased paying," per the same application, paras. 7, 82–99.

The business was sold in the fall of 2025. What remains of the proceeding, fifteen months on, is a lawsuit filed inside it. PricewaterhouseCoopers Inc., the monitor, and Bank of Montreal, as agent for a syndicate that also includes Business Development Bank of Canada, National Bank of Canada and Royal Bank of Canada, are suing Sinobec's founder and former chief executive, together with two Hong Kong trading companies, two companies in the People's Republic of China, a Singapore company and his holding company Chengdu Holding Inc., per the Modified Originating Application, July 3, 2026, paras. 1, 5. On the strength of that suit the court has seized his shares and 29 properties in Québec before judgment and frozen the defendants' assets worldwide. On August 27, 2026 the monitor went back to Justice Karen M. Rogers of the Superior Court of Québec, Commercial Division, to ask how the freeze should work in practice. None of the plaintiffs' allegations has been tested at trial.

What the plaintiffs allege

The allegations are the plaintiffs' and have not been tried; the defendants' contestation of the interlocutory application is due October 23, 2026. The suit rests on a sworn statement by Marie-Chantal Dréau, a forensic partner at PwC, and on statements by Philippe Jordan of the monitor and Marie-Klaude Gagnon of BMO's special accounts management unit, per the Modified Originating Application, July 3, 2026, paras. 8–9.

The core of it is a borrowing base. Under a 2019 credit agreement with a revolving facility of up to US$155 million, the lenders financed goods in transit to customers and warehouses in Canada and the United States; they did not finance goods bought abroad and sold abroad, which the pleading calls F2F. The plaintiffs allege that, at least from August 2024, a significant amount of the inventory reported as in transit to North America was in fact being sold to foreign buyers directly from foreign suppliers, and that the founder and personnel acting at his direction misrepresented it in the reports the lenders relied on, per the Modified Originating Application, July 3, 2026, paras. 10, 72. PwC, then the lenders' adviser, saw goods in transit rise from approximately US$58 million on June 27, 2024 to about US$92 million on August 15, 2024; Sinobec explained the increase as longer shipping delays caused by conflict in the Middle East. A field examination for a prospective refinancing lender, PNC, later put goods in transit at US$76.4 million as of July 31, 2024, approximately US$43.2 million of it foreign-to-foreign, and the refinancing did not close, per the same application, paras. 106–107, 119–120.

Pressed in December 2024 to take the ineligible inventory out of the base, the plaintiffs say, the group sold it on paper. By January 31, 2025, approximately US$83.6 million had been converted into purported receivables or cash through sales of aluminum ingots to fourteen customers the pleading calls the North American Brokers. By about April 14, 2025, approximately US$2 million had been collected, per the same application, paras. 136–138, 152. On May 23, 2025, three days before the filing, several of the brokers told the lenders' field examiner that the receivables they had confirmed in February were null. After the filing, all of them refused the monitor's demands for payment, most relying on alleged "cash-on-cash" side letters under which they owed nothing until the Hong Kong companies paid them. The plaintiffs do not admit that those side letters exist, per the same application, paras. 158, 171–174.

Where the money went is the second half of the claim. The monitor's investigation, the pleading says, found that at least US$85.2 million in proceeds from the ingot sales to end users in China were "most likely collected" by Chinese companies related to the founder, and that at least US$23.1 million moved on to the two Hong Kong companies, which never remitted it to Sinobec, per the same application, paras. 13–16. A Chinese company at the centre of those transfers was moved under the Singapore defendant's ownership on April 27, 2025 and voluntarily dissolved that August 7, per the same application, para. 19(f).

The lenders claim CAD 91,222,670.42 (US$65,929,245.16), the shortfall still owed to them. The monitor seeks the difference between that and the funds it says were diverted: approximately CAD 51,640,053.89 or, if the lenders' claim fails, the entire CAD 142,862,724.36 (US$103,250,996), per the same application, para. 7. The pleading says unsecured creditors are not expected to recover anything unless the lenders are paid in full, per the same application, para. 214.

The seizure and the freeze

The plaintiffs ground the urgency in a pattern of disposals. They allege that the founder transferred a Markham, Ontario property he had bought in July 2024 for CA$1,474,000 to a family holding company for CA$2 in April 2025, and that companies related to him sold a Calgary property for CA$7,000,000 in June 2025 and a Chambly, Québec property for CA$3,800,000 in February 2026. A Wisconsin federal court restrained two related U.S. companies from disposing of real estate there in December 2025, and the plaintiffs say properties were still being marketed after that, per the same application, paras. 218, 221–222, 225–228.

The seizure order, heard ex parte on June 5 and signed on June 12, 2026, is in French. Justice Rogers found a serious question to be tried, prima facie evidence of the plaintiffs' claims, and "des motifs raisonnables de craindre que les créances des Demanderesses soient en péril" [translation: reasonable grounds to fear that the plaintiffs' claims are in jeopardy], per the Ordonnance de saisie avant jugement, June 12, 2026, paras. [2]–[4]. The order seizes the founder's shares and patrimonial rights in thirteen companies and four trusts, and 29 immovables in Dorval, Lacolle, Magog, Mont-Tremblant, Montréal, Baie-Saint-Paul and Rigaud. Fifteen of the properties are registered to Chengdu, per the same order, para. [A] and Annexe C.

The same day she granted a provisional injunction of the Mareva type. It was served on June 29 and, as renewed by consent, enjoins the defendants and the Schedule B companies and trusts from dealing with their assets in Canada, the United States, China, Hong Kong, Turkey, Mexico, Germany, Poland, Australia and Singapore, including any asset a third party holds on the founder's direct or indirect instructions. It allows the founder $10,000 a month for living expenses, caps his personal legal spending at $200,000 and that of the trusts, Chengdu and the family companies at $300,000 without further leave, and lets the parties under injunction deal with assets "in the ordinary and proper course of business" only with the court's leave or the plaintiffs' counsel's written consent, per the Safeguard Order, July 9, 2026, paras. [4], [A], [G]–[J], [L].

That consent clause came out of a complaint. the founder's counsel told the court some of the companies needed to receive deposits and pay salaries by July 8, and that banks were refusing both because of the injunction. The July 7 safeguard order confirmed that deposits were never barred and added the consent route, per the Safeguard Order, July 7, 2026, paras. [5]–[6], [A]–[B]. The July 9 order records that every party that had appeared agreed to it "without any admission whatsoever by any party," and that the plaintiffs and the defendants disagree over whether the injunction reaches the assets of the founder's spouse, who was impleaded because her shares in the family companies may be affected. Until the court decides, she need not disclose her own assets, per the Safeguard Order, July 9, 2026, paras. [11], [E]–[F].

The seizure can still be challenged. The Code of Civil Procedure gives a seized party five days to apply to quash it. At the July 2 hearing the court extended that to August 14: "Le Tribunal PROLONGE jusqu'au 14 août 2026 à 16 h le délai accordé aux parties saisies pour signifier et déposer une demande en annulation de la saisie" [translation: the Court extends to August 14, 2026 at 4 p.m. the time granted to the seized parties to serve and file an application to quash the seizure], per the Procès-verbal d'audience, July 2, 2026, p. 3. On August 14 their counsel asked for another week, unopposed, and the deadline moved to August 21, per the Case Management Order, Aug. 18, 2026, paras. [4]–[5], [A]. The schedule filed on August 28 now places any application to quash on October 23, 2026, beside the defendants' contestation of the interlocutory injunction, per the Schedule for Presentation of the Application for Interlocutory Injunction, Aug. 28, 2026, p. 5.

What the monitor wants the court to direct

On August 6 the plaintiffs and the companies signed an agreement on payments in the ordinary and proper course of business, which the motion calls the Cash Flow Protocol. The companies file weekly cash flow forecasts and variance reports, and the monitor has absolute discretion to refuse any payment, per the Motion of the Monitor for Directions, Aug. 27, 2026, paras. 18, 26. Three signatories, Green Zero International Inc., 14871243 Canada Inc. and 15055083 Canada Inc., signed through the founder as president but are not themselves named in the injunction. Their bank froze their accounts when shown the order, and the monitor asks the court to confirm that those accounts are assets caught by it, per the same motion, paras. 19–25.

The monitor consolidated the forecasts through October 3, 2026, eliminating intercompany transactions, which it describes as significant, and concluded that excluding the sale of 3656 Bélair Street in Montréal, a Chengdu property under seizure, the companies face a liquidity shortfall of approximately $326,866 and a $1,343,363 decline in their cash position. The companies, it says, "do not have the ability to carry out their activities without relying on the disposition of Assets," per the same motion, paras. 30–32. It does not oppose the Bélair sale, provided the net proceeds are held in trust by the monitor until judgment on the merits; the promise to purchase is filed under seal, per the same motion, paras. 31, 36.

It also lists $410,548 of payments marked "Not authorized" or "Requiring further inquiry." The motion describes them as payments without supporting documents, payments that do not match invoices, amounts that fell due before the injunction, "expenses of a personal nature (e.g., boat repairs and yacht club fees)," and payments to entities "whose legitimacy requires further scrutiny," per the same motion, paras. 37–38. It separately questions the salary paid to the founder's spouse and mortgage payments above the monthly minimum, per the same motion, para. 40.

The variance reports worry the monitor more. Since the first ones arrived on August 11, it says, the companies have collected less than forecast and have not made some forecast disbursements, which gives "an appearance of a positive cash position in the very short term" while unpaid obligations accumulate. The monitor submits that this risks eroding the frozen assets and "raises concerns that certain Entities may be trading while insolvent," per the same motion, paras. 42–45. Its proposed order would require the companies to keep a cash-neutral or cash-positive position on a consolidated basis, with the Bélair proceeds excluded, and would declare the monitor entitled to refuse any payment that breaks that rule, per the same motion, paras. 46–49 and conclusions.

The last request concerns Florida, where Marquis Star Holding Inc. and Marquis Solar Frame Works, Inc., wholly owned through Chengdu, are in Chapter 11 in the Southern District. On July 18, EDC, which holds a claim of more than US$11 million, moved for a Chapter 11 trustee, alleging that the founder still controls the debtors and has used Chengdu and other entities to divert their assets. On August 18 the U.S. debtors sued Chengdu and others to recover more than US$15 million in dividends, loan repayments and rent. Because those debtors are outside the freeze, the monitor fears that a judgment or settlement in Florida could move frozen assets out of reach, and asks that Chengdu, All Link Global Transportation Inc. and three trusts be barred from consenting to any judgment, settlement or enforcement measure affecting the assets without the Québec court's leave, per the same motion, paras. 50–56. The motion was noticed for presentation on August 28, the day the July 9 safeguard order was due to expire at 11:59 p.m., per the same motion, p. 16.

The estate behind the lawsuit

The CCAA proceeding has been kept open for this. Eight of the brokers had objected that the sale and the January 2026 distribution order had ended its purpose. On June 18, 2026, Justice Michel A. Pinsonnault dismissed their objections, kept the monitor's investigatory powers in place and issued a fourth amended and restated initial order. He refused, however, to let the lenders' counsel examine witnesses alongside the monitor, which is "already duly assisted with capable and experienced counsel," per the Judgment on the Fourth ARIO, June 18, 2026, paras. 4, 6, 81–89. The U.S. Bankruptcy Court for the Northern District of Illinois recognized that order on August 13, per the Order Granting Recognition of Fourth ARIO, Aug. 13, 2026.

The stay runs to November 28, 2026, per the Stay Extension Order, June 12, 2026, para. [10]. The monitor's June report put its cash at US$2,751,000 after US$1,672,000 of professional fees since mid-January, and said the fees still to come could be paid from the fall 2025 sale proceeds. Its investigation had processed more than 2,204,000 documents from 27 custodians, per the Seventh Report of the Monitor, June 10, 2026, paras. 30, 36, 40–41.

Under the August 28 schedule, Ms. Dréau, the founder, his spouse and any declarants for the defendants are to be examined in the week of October 5; the defence's affiants in the week of November 16; and the interlocutory injunction and any application to quash the seizure are to be heard on January 20 and 21, 2027, per the Schedule for Presentation of the Application for Interlocutory Injunction, Aug. 28, 2026, p. 5.