Cayman Islands Add New Ant-Fraud Protection

How to freeze assets in the Cayman Islands.

Copy of new act: 141020-Cayman-Grand-Court-Amendment

In many people’s minds, the Cayman Islands have been the place where fraudsters go to hide their money. Even we can prove the money was wired by the perpetrators into a Cayman Island bank, the ability to freeze the money prior to judgment was in doubt. The Cayman Islands have added a new anti-fraud protection for offshore victims. The Cayman Island court now clearly has the statutory power to appoint a receiver and grant other interim relief while the case is pending in another jurisdiction.

The cases we see are something like this: The perpetrators defraud investors in a Ponzi scheme (or pump and dump) and we can trace the money to the Cayman Islands. We cannot sue the perpetrators in the Cayman Islands (either because of lack of jurisdiction or for tactical reasons) and begin the case in a state or federal court. Once we file the case and let the perpetrators know that we have found the Cayman Island money, they move the money to parts unknown. If we get an injunction freezing the money from the local court, the Cayman bank does not have to (and probably will not) honor it.

The only practical solution is to obtain an order freezing the assets from the Cayman court. Prior to the passage of the amendment, it was not clear if the Cayman court could assist offshore plaintiffs prior to the time they obtained an offshore judgment. The plaintiffs would then need to take their judgment to the Cayman Islands and go through the process of having it recognized by the Cayman Island court. By that time, the money would be gone.

Even though there is now a potential solution to the problem, the Cayman Island courts regularly impose security for costs on out of country plaintiffs. The costs can exceed $100,000 and are a huge barrier to bringing the fraudster to justice.

Cayman Islands Add New Ant-Fraud Protection

Submit a Comment