Powers of foreign officeholders — guidance from the Cayman Islands Grand Court

In the recent case of Irving H Picard and Bernard L Madoff Investment Securities LLC (In Securities Investor Protection Act Liquidation) v Primeo Fund (in Official Liquidation) the Cayman Islands Grand Court has handed down a ruling giving detailed analysis of the powers of officeholders, who have been appointed in foreign insolvency proceedings and recognised in the Cayman Islands, to pursue transaction avoidance claims in this jurisdiction. The circumstances surrounding the decision, and the decision itself, serve to emphasise the differences in Cayman Islands insolvency procedure from the UNCITRAL regime adopted in many leading onshore jurisdictions, including the United States and the United Kingdom. The Picard decision is also noteworthy for the identification of lacunae in two sections of the Companies Law; and for its commentary on the well-known cases of Cambridge Gas and Rubin.

Mr Irving H. Picard, held (and continues to hold) the office of trustee of Bernard L. Madoff Investment Securities LLC. BLMIS was and is the subject of insolvency proceedings in New York. Its former owner and controller Mr Bernard Madoff has admitted that he used BLMIS to operate a Ponzi scheme and it was accepted that at all relevant times BLMIS’s investor advisory business was being carried on fraudulently. BLMIS was incorporated in New York, and had as its principal place of business New York City. Certain Cayman Islands investment funds including the Defendant (Primeo) placed funds with BLMIS for investment prior to the disclosure of BLMIS’s fraudulent practices, and this was BLMIS’s only connection to the Cayman Islands. Primeo invested in BLMIS both directly and indirectly through two further investment funds…

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