A new court ruling in the BVI, based on one of the biggest Bernard Madoff feeder funds, could shake up the funds industry as it provides clarification (and reassurance) for investors redeeming investments from BVI funds that the fund will not subsequently be able to recover redeemed proceeds, according to Robert Foote (pictured), managing associate at Ogier BVI. This judgment could set a precedent for other countries.
The Judgement rules that investors who made withdrawals from the largest hedge fund to become insolvent because of Bernard Madoff’s fraud scheme cannot be forced to return the money. The liquidators of the Fairfield Sentry fund, domiciled in the BVI issued over 175 claims against the investors for in excess of USD1.4bn.
In September, the BVI court ruled that liquidators for the Fairfield Sentry fund, domiciled in the BVI, cannot claim back funds from investors who withdrew money in the six years before Madoff confessed to his fraud in December 2009. The investors were encouraged after this ruling to apply for summary judgment for the final disposal of BVI actions. They did this and won a new ruling this week, meaning that going forward, investors will be able to redeem out of BVI funds, without worries that the fund will subsequently be able to redeem proceeds.
This new ruling in the BVI could well set a precedent for redemption cases in other countries, including the US, where the Fairfield Sentry liquidators are also using the US courts in New York to try to claim back money from investors who withdrew money from the Fairfield fund. The BVI ruling does not automatically affect those lawsuits, except in those cases where the New York claims are based on BVI law.
