Sponsored briefing: Fraud and asset recovery in the Cayman Islands

Frauds, especially those of a complex nature, often have an international or multi-jurisdictional component. Given the status of the Cayman Islands as one of the leading financial and banking centres in the world, the use of Cayman Islands based financial institutions and corporate entities has featured in some of the worlds largest frauds including the Bernie Madoff Ponzi Scheme, 1MDB scandal and the approximate $126bn Ponzi Scheme involving Ahmad Hamad al-Gosaibi & Brothers and the Saad Group.

Fortunately, there are a number of tools in our toolkit in the Cayman Islands to combat complex and cross-border fraud and assist in asset recovery, including discovery, document, and asset preservation mechanisms such as freezing injunctions, insolvency proceedings, and Norwich Pharmacal, Anton Piller, and Bankers Trust orders; as well as the ability to recognise and provide assistance to foreign courts and officeholders.

Our team at Baker & Partners possesses a broad knowledge and many years of experience advising and acting in complex and high-value fraud and asset recovery cases. We assist our clients by assessing their case and developing and advising on potential asset recovery strategies to suit their circumstances and provide the best opportunity for recovery.

Interim relief and Disclosure Remedies

Interim relief and disclosure remedies are available to prevent the dissipation of assets, and to obtain information, including from third parties who have been caught up in the wrongdoing.

Freezing injunction

A freezing (Mareva) injunction can prevent the dissipation of assets (including assets outside the jurisdiction) pending judgment, by restraining the respondent from dealing with assets (typically up to the value of the underlying claim). An order for disclosure of the respondents’ assets is usually obtained at the same time.

Bankers Trust orders

An applicant may seek third-party disclosure from the defendant’s bank to verify the origin and destination of payments into and from a bank account.

Norwich Pharmacal

An application for a Norwich Pharmacal order is typically a pre-action remedy granted against a third party innocently mixed up in wrongdoing. It is used to force the disclosure of documents or information, which may identify the wrongdoer or potential beneficiary, or the nature of the wrongdoing, which may be the subject of subsequent legal proceedings.

Anton Piller orders

An applicant may seek an order forcing the respondent to allow the applicant to enter his premises for the search and seizure of documents and property which is the subject matter of the action.

Confidentiality and non-disclosure orders

To prevent a defendant from being made aware of intended proceedings and taking steps to dissipate assets or put them beyond the reach of the applicant, an applicant may apply for confidentiality orders in advance of making applications. A non-disclosure or ‘gagging order’ may be coupled with the full suite of confidentiality orders.

Insolvency Proceedings

Insolvency proceedings such as official and provisional liquidations are powerful tools to combat fraud and recover assets. An official liquidator has considerable powers to:

• investigate the affairs of a business by compelling the turnover of documents and information as well as requiring the examination of ‘relevant persons’;
• pursue actions, including those to set aside antecedent transactions including fraudulent dispositions and preferential payments; and
• seek recognition of their powers in foreign jurisdictions.

The appointment of a provisional liquidator is incredibly important to prevent the imminent misuse or dissipation of a company’s assets. A provisional liquidator’s powers are set out in their appointment order and can include the examination powers afforded to official liquidators.

Receiver

The Cayman court may appoint a receiver to preserve a company’s assets and ‘hold-the-ring’ pending judgment, including judgment in foreign proceedings. A receiver may also be appointed to collect specific assets and deal with those assets as sanctioned by the court.

Assistance to Foreign Courts and Office Holders

The Cayman court may also recognise and provide assistance to foreign courts and office holders to:

• obtain evidence in both criminal and civil cases in accordance with the Evidence (Proceedings in Other Jurisdictions) (Cayman Islands) Order 1978;
• recognise the right of a foreign office holder to act in the Cayman Islands, require the examination of individuals by and order the turnover of documents or property to the office holder; and
• enforce foreign judgments and arbitral awards.

Final word

Whether you wish to bring proceedings in the Cayman Islands or seek assistance in contemplation of or in aid of foreign proceedings, Baker & Partners can help you navigate the legal challenges associated with the preservation and recovery of assets, documentation, or information.