October 28, 2020

Cayman Islands: Statement from EY on Caledonian Bank and Caledonian Securities

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By Mutual Consent the SEC and Caledonian Revise Preliminary Injunction

“As has previously been reported on 6 February 2015 the US Securities and Exchange Commission (SEC) filed proceedings against Caledonian Bank Limited (CBL)and Caledonian Securities Limited (CSL, and with CBL, Companies) in the United States District Court, Southern District of New York (‘US District Court’) alleging breaches of various securities law in the United States. In conjunction with this claim the SEC also sought and obtained a temporary restraining order (freezing order) against all assets held in the United States. Subsequently, the Companies, acting through their directors, were able to obtain an amendment to this order such that it effectively restrained monies held by CBL in the United States to a value of some USD$76m.

As has also been previously reported, subsequent to these events Keiran Hutchison and Claire Loebell of Ernst & Young Ltd. were appointed as Controllers over the Companies by the Cayman Islands Monetary Authority and then on 23 February 2015 the Grand Court of the Cayman Islands made Orders appointing Mr Hutchison and Ms Loebell as Joint Official Liquidators (JOLs) over the Companies. Since appointment the JOLs have, with the assistance of Walkers and Proskauer Rose LLP New York, been in active discussions with the SEC in respect of the claims against the Companies. In this regard, on 23 March 2015 the US District Court made Orders which, inter alia, had the effect of reducing the quantum of the freezing order to USD$7m.

The JOLs do caution that it does not mean that the SEC’s proceedings against the Companies are concluded and the JOLs must continue to take steps in the proceedings on behalf of the Companies.”

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Comments

  1. The SEC started off by freezing close to $400m of Caledonian’s assets on an ex party motion in New York, claiming that the restraining order was very urgent and that Caledonian was a “flight risk”. But now, they’ve reduce the freeze to only $7m, which is less than 2% of Caledonian Bank’s asset base. Did the SEC, with the assistance/complacency of CIMA, really need to destroy this bank? How strong is the SEC’s claim if they’ve backed off by 98%?

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