November 25, 2020

Axiom hearing decision will not be delivered until Tuesday (12)

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David MarchantA decision on whether to place Axiom Legal Financing Fund into Receivership or allow it to be restructured by a group associated with those responsible for its insolvency and fraudulent activity will not be delivered until next Tuesday at the earliest.

This announcement has resulted in this blog from OffshoreAlert owner, David Marchant:

Is Cayman Judge Angus Foster About To Do The Unthinkable?

February 08, 2013 by David Marchant

Investors in Axiom Legal Financing Fund should be extremely concerned by the note that Cayman Islands judge Angus Foster circulated earlier this week seeking what are essentially ‘affidavits of reassurance’ from a dubious group that has proposed a ridiculous scheme to restructure the Fund. The irresistible impression from Foster’s note is that the restructuring proposal – which should have been laughed out of court – is not only considered to be credible by Foster but might actually be the front runner over the Receivership application that is supported by the Fund’s independent directors, certain investors, and the local financial services regulator, not to mention common sense.

My initial reaction upon reading Foster’s note was ‘this is unbelievable’ but, since nothing surprises me any more about the Axiom affair, I downgraded my opinion to ‘this is almost unbelievable’. I was not present at the recent two-day court hearing to determine Axiom’s future so I can’t comment on the quality of evidence from either side that was heard by Foster. But even if the judge heard little or no evidence that the approximately £117 million was raised under false pretenses (i.e. securities fraud) and more than 80% of it was stripped out by insiders, often for services that were never rendered (i.e. common fraud), he would undoubtedly have heard that the Fund is massively insolvent and that alone should have been enough for Foster to immediately issue an order of Receivership.

That Foster should even entertain the thought that a hopelessly insolvent Fund should be handed over to a 10-week-old company (City Equities Investment Management Ltd.) that is connected to the fraudster who is most responsible for the Fund’s demise (Timothy Schools) is bizarre, to say the least. If the judge ends up actually issuing an order along those lines, it will be worthy of the most extreme ridicule and will do no favors for the international reputation of the Cayman Islands, which is generally a high-quality jurisdiction, in my experience.

From http://www.offshorealert.com/BlogPost.aspx?id=46351&blogid=3651

See also:

Regulator opposes management bid for troubled legal fund

By Donia O’Loughlin | Published Jan 28, 2013, FT Adviser

Regulator backs receivership of fund stating it would be “unlikely” to generate further inflows due to “unresolved allegations”.

The Cayman Islands Monetary Authority (Cima) has said it will oppose a bid to take over management of the embattled Axiom Legal Financing Fund by a firm related to former manager Tangerine Investment Management, which was removed from its role in November last year.

The independent Axiom directors and the regulator have both stated they support an ongoing petition for the Axiom Legal Financing Fund to be put into receivership, arguing there is a potential conflict of interest in City Equities, which like Tangerine is owned by British Virgin Islands-based Otterswick Ltd, becoming investment manager.

Last week, City Equities called on investors to support its petition to take over the running of the Cayman Islands-based fund, believing that there is “an appetite for litigation funding” and if it becomes the fund manager it can generate future returns for investors.

Axiom Legal Financing Fund directors previously said they are supporting the proposed appointment of Grant Thornton as receiver in acknowledgment of shareholder preference, despite claiming KPMG, which recently conducted an external audit of the fund’s assets following a number of allegations, would be the more appropriate choice.

In a letter to the Grand Court of the Cayman Islands, dated 24 January and seen by FTAdviser, Cima said it has “no objections” to Grant Thornton being appointed as receivers rather than KPMG.

The affidavit of Yolanda Banks McCoy, head of investments and securities at Cima, also touches on a perceived conflict of interest in the City Equities proposal.

The affidavit says: “Cima continues its due diligence on the underlining (sic) and ultimate beneficial owners of these entities and as such are not in a position to fully assess the veracity of the proposal but take the initial view that this is not a feasible proposal.”

Cima’s reasons for this include Tangerine being the “subject of serious allegations of misconduct which must be fully investigated” and that the fund is currently suspended which indicates “problems with the Portfolios’ liquidity”.

The affidavit says: “Cima is of the belief that it would be unlikely that investors would choose to invest in a fund with these unresolved allegations.”

The directors said in a separate letter on 24 January, also seen by FTAdviser, that City Equities’ plan is not in the best interests of shareholders due to an “inherent conflict” they consider exists with Tangerine Investment Management.

Alongside the fund’s independent directors and Cima, investors which fund distributor Taylor Moore is “loosely representing” have also supported the receivership proposal, suggesting there may be a lack of support for City Equities’ proposal.

The hearing of the application for Grant Thornton to be appointed receiver is scheduled to occur on 31 January 2013 and 1 February 2013. The Axiom fund directors said that the only party opposed to the application is Forbes Hare, on behalf on their clients Tangerine Investment Management and City Equities.

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