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Judge rejects bid to oust Cytonn liquidator in Sh11bn dispute
While dismissing the bid to remove the Official Receiver, the court partly allowed applications demanding financial accountability over the management of The Alma estate.
The High Court has rejected attempts to remove the Official Receiver of Cytonn High Yield Solutions (CHYS) LLP as the firm’s liquidator over allegations of favouring secured lenders, mismanaging assets, operating without transparency, and mishandling the proposed sale of a Sh1 billion stake in Superior Homes Kenya.
The court dismissed claims by an unsecured creditor—Pastor Ephrahim Karangi—that the Official Receiver breached fiduciary duties and concealed financial dealings.
It had also been claimed that the official receiver unlawfully channelled rental income from Cytton’s The Alma estate to SBM Bank, handpicked creditors’ committees, and failed to protect unsecured investors in the collapsed Sh11 billion investment scheme.
The court, however, said the applicants had failed to provide evidence proving misconduct, corruption, conflict of interest, bias, or breach of statutory duty by the Official Receiver.
It held that dissatisfaction with commercial decisions or delays in the liquidation process was insufficient to justify the removal of a court-appointed liquidator.
At the same time, the court ordered the Official Receiver to file detailed accounts within 45 days on collections and payments made at The Alma residential estate in Ruaka, payments to consultants and service providers engaged during the liquidation, and all funds received from SBM Bank Kenya.
“The Official Receiver shall furnish a comprehensive account of the total collections and payments made toward essential services, any outstanding obligations, and all related financial records relating to The Alma for the period between February 4, 2025, and June 4, 2025, within 45 days,” the court ordered.
The ruling touches on the fight for control of Cytonn’s assets, investor recoveries, estate management, and the legal priority enjoyed by secured lenders in insolvency proceedings.
Cytonn High Yield Solutions (CHYS) and related Cytonn Project Notes entities were placed under liquidation in January 2023 after defaulting on billions owed to thousands of investors who had pumped money into high-yield real estate-backed investment products.
The unsecured creditor (Pastor Karangi) had asked the court to remove the Official Receiver and replace him with private insolvency practitioner Tom Ouma Mungai, accusing the office of conflict of interest, secrecy, corruption, wastage, and breach of fiduciary duty.
In the application dated July 2025, Pastor Karangi claimed the Official Receiver unlawfully favoured SBM Bank through a consent signed on August 1, 2023, allowing rental income from The Alma project to service the bank’s debt estimated at more than Sh750 million.
The applicants argued that the arrangement unfairly disadvantaged unsecured creditors and investors whose recoveries remained uncertain as interest on the SBM debt continued accumulating. Also sought was the full disclosure of the transactional dealings between the Official Receiver and Superior Homes Kenya Limited.
This included the alleged sale of a 12.5 per cent shareholding of Cytton in Superior Homes Kenya at Sh250 million, any deposits or consideration received, and an explanation as to why the shares were allegedly sold at what he described as a gross undervalue compared to their approximate market value of Sh1 billion.
The court rejected those arguments, saying SBM Bank’s position as a secured creditor was protected by law.
“By virtue of a valid charge, secured creditors rank above unsecured creditors, and that priority is a statutory consequence rather than a creation of the Official Receiver,” the court ruled.
It added that the consent agreement protected unsecured investors because any surplus remaining after settlement of SBM Bank’s debt would revert to the Official Receiver for distribution to creditors.
The Official Receiver, through a replying affidavit sworn by Mark Gakuru, also denied the allegations of secrecy surrounding the proposed disposal of Cytonn’s 12.5 per cent stake in Superior Homes Kenya, saying creditors had been updated during meetings held on July 18, 2025.
The office told the court that Deloitte had been engaged after firms including KPMG, PwC, Ernst & Young and Baker Tilly were invited to submit quotations for an independent valuation of the shares before any sale.
The court also dismissed allegations that the Official Receiver had concealed information from investors or handpicked members of creditors’ committees.
The court said records showed creditors’ meetings had been convened on March 7, 2023, September 26, 2024, and July 18, 2025, where investors received updates on claims, liquidation progress, asset disposals, and the status of Cytonn special purpose vehicles.
“The Insolvency Act is deliberately structured around the convening of creditors’ meetings,” the judge said.
“These meetings serve as the statutory mechanism through which creditors can interrogate the conduct of the liquidation, demand accountability, and influence its direction by passing resolutions.”
The court found that the composition of creditors’ committees had been determined through voting by creditors and not through manipulation by the Official Receiver as alleged.
Also rejected were accusations of bribery, corruption, and fabricated meeting minutes, saying no evidence had been produced to support those claims.
“The insinuation that the minutes of the creditors’ meeting were fabricated is a grave allegation, yet it has been advanced without a shred of supporting evidence,” the court ruled.
The court further held that the removal of a liquidator is an exceptional remedy requiring proof of misconduct, incapacity, conflict of interest, or breach of statutory duty.
“Mere dissatisfaction with the manner in which the liquidator has exercised discretion, or disagreement with commercial decisions taken in good faith, does not suffice,” the judge said.
While dismissing the bid to remove the Official Receiver, the court partly allowed applications demanding financial accountability over the management of The Alma estate.
The dispute arose after the Official Receiver took over management of the Ruaka property and appointed Muigai Commercial Agencies to run the estate between February and June 2025.
Residents and homeowners complained that rent and service charge collections were not properly accounted for and essential services such as electricity and water remained unpaid.
The court ordered the Official Receiver to file a comprehensive account of all collections, payments, and outstanding obligations relating to The Alma within 45 days.
In addition, the court directed the Official Receiver to disclose procurement records and payments made to Deloitte, Muigai Commercial Agencies, EK Security Services, and other firms engaged during the liquidation.
A separate report detailing all funds received from SBM Bank must also be filed in court and shared with creditors.
At the same time, the court reaffirmed that once preservation and vesting orders were issued over The Alma, the Official Receiver became the sole lawful custodian of the property.
“Any directive purporting to reassign management powers to a homeowners’ committee or other entity is ultra vires, unlawful, and void ab initio,” the judge ruled.
The court said the reports ordered would be shared with creditors for deliberation during the next creditors’ meeting as the battle over the recovery of billions tied to the collapsed Cytonn empire continues.
