Cytonn Integrated Project LLP has suffered another legal setback after the Court of Appeal declined its attempt to block SBM Bank from auctioning The Alma residential development in Ruaka, Kiambu County. The ruling clears the way for the lender to exercise its statutory power of sale over the property, which was pledged as security for loans exceeding Sh1 billion. The dispute is linked to the wider collapse of Cytonn High Yield Solutions and ongoing efforts to recover funds for thousands of affected investors.
Key Overview
- The Court of Appeal has rejected Cytonn’s latest attempt to stop an auction of The Alma project.
- SBM Bank is seeking to recover loans exceeding Sh1 billion.
- The Alma residential development in Ruaka was used as security for multiple loan facilities.
- Cytonn initially secured a Sh650 million construction loan in 2019.
- Additional financing included a Sh129 million charge and a Sh779 million debenture.
- SBM Bank alleges that Sh672.5 million in apartment sales proceeds was diverted from loan repayment.
- More than 3,000 investors are awaiting recovery of funds linked to the Cytonn collapse.
- The ruling removes a significant legal barrier to the planned sale of the property.
Court Clears Way for SBM Bank Auction
Cytonn Integrated Project LLP has lost a crucial appeal in its long-running legal battle with SBM Bank, paving the way for the lender to proceed with the auction of a major real estate development in Ruaka, Kiambu County.
The Court of Appeal’s decision removes one of the last significant legal obstacles preventing the bank from exercising its statutory power of sale over The Alma project, a residential development that served as collateral for several loan facilities advanced to Cytonn.
The ruling marks another chapter in a dispute that has attracted significant attention from investors, creditors, and the wider property market due to its connection with the collapse of several Cytonn-linked investment vehicles.
The Alma Project at the Centre of the Dispute
The legal battle revolves around The Alma, a residential housing project located in Ruaka that was developed through Cytonn Integrated Project LLP.
In 2019, Cytonn obtained a Sh650 million construction facility from SBM Bank to support the development. The loan was secured through a first-ranking legal charge over the property.
As the project progressed, additional borrowing was secured against the same asset. The financing package eventually expanded to include a further charge of Sh129 million as well as a Sh779 million fixed and floating debenture.
The combined facilities pushed the bank’s exposure beyond Sh1 billion, making The Alma one of the most significant assets involved in the wider Cytonn financial challenges.
With the loans remaining unresolved, SBM Bank has sought to recover its funds through the sale of the charged property.
Legal Challenges Fail to Stop Sale
The latest appeal represented another attempt by Cytonn to halt the planned auction.
However, the courts have consistently ruled in favour of the lender’s right to enforce its security.
In 2023, the High Court allowed SBM Bank to proceed with exercising its statutory power of sale. Subsequent legal challenges brought by Cytonn were dismissed in late 2025, further strengthening the bank’s position.
The recent Court of Appeal ruling effectively confirms earlier decisions and significantly reduces the legal avenues available to stop the auction process.
For SBM Bank, the decision provides a clearer path toward recovering outstanding amounts owed under the loan facilities.
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Allegations of Diverted Sales Proceeds
A key aspect of the dispute involves allegations by SBM Bank regarding the handling of proceeds generated from apartment sales within The Alma project.
The lender has accused Cytonn of diverting approximately Sh672.5 million that should have been used to reduce outstanding loan balances.
According to the bank, proceeds from property sales were expected to contribute toward repayment of the construction financing and related facilities secured against the development.
The allegations have featured prominently throughout the legal proceedings and form part of the broader concerns surrounding the management of funds linked to Cytonn’s property development projects.
While the courts have primarily focused on the lender’s security rights, the claims highlight the financial complexities that have emerged from the project’s collapse.
Wider Cytonn Investment Crisis
The dispute extends beyond a single property development and forms part of a much larger financial collapse involving Cytonn High Yield Solutions and several associated special purpose vehicles.
Investor funds raised through these structures were used to finance various real estate developments, including The Alma.
The situation deteriorated in 2019 when Cytonn High Yield Solutions entered administration. Over time, several related project entities were also placed under liquidation as efforts began to recover assets and repay affected investors.
The collapse left thousands of investors exposed and triggered a lengthy legal and administrative process aimed at identifying, preserving, and distributing recoverable assets.
The Alma project has therefore become one of the key assets within a broader effort to maximize recoveries for creditors and investors.
Investors Await Recovery of Funds
The latest court decision is particularly significant for investors who have been waiting years for progress in the recovery process.
Official Receiver Mark Gakuru opposed Cytonn’s latest application, arguing that continued delays would negatively affect more than 3,000 investors seeking to recover their funds.
Many of these investors have been waiting since early 2023 for meaningful progress in the liquidation process.
According to the receiver, repeated court applications have slowed efforts to realize assets and distribute proceeds, prolonging uncertainty for affected stakeholders.
The ability to proceed with the auction may therefore accelerate the recovery process, although the extent of recoveries will depend on the eventual sale value and the claims of various creditors.
Impact on Kenya’s Real Estate and Investment Sector
The Cytonn case continues to serve as a cautionary example within Kenya’s investment and real estate sectors.
The dispute highlights the importance of project financing structures, investor protections, and the legal rights of lenders when developments encounter financial difficulties.
It also underscores the risks associated with highly leveraged property projects, particularly when market conditions or cash flows fail to support debt obligations.
For lenders, the ruling reinforces the enforceability of secured lending arrangements. For investors, it highlights the importance of understanding how funds are structured and the risks that can arise when projects face financial distress.
Outlook
The Court of Appeal’s decision significantly strengthens SBM Bank’s position and clears the way for the auction of The Alma project in Ruaka. With legal challenges continuing to fail, attention is now likely to shift toward the sale process and the potential recovery of funds for creditors and investors. For the more than 3,000 affected investors, the ruling could represent a step toward unlocking value from one of the most important assets tied to the wider Cytonn insolvency proceedings.
Sources: ynews, Capital Business, Mjengo Hub
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