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Cayman Secrecy: 1/3 of business court cases in 2019 sealed from public view

August 11, 2019 by David Marchant

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One-third of all cases filed at the Financial Services Division of the Grand Court of the Cayman Islands for the first seven months of 2019 are sealed from public view, OffshoreAlert can reveal.

Forty-nine of the 146 cases filed at the FSD from January 1st to August 2nd, 2019 remained under seal as of August 6th - a rate of 33.6%, our research showed. For the sealed cases, there is no entry in the Court's Register of Writs and other Originating Process and no documents are publicly-available.

Anthony SmellieAnthony SmellieSuzanne BothwellSuzanne BothwellMany of the sealed cases are believed to be winding up petitions against entities suspected of insolvency, following a policy introduced by the Court last year that, essentially, the interests of foreign investors in and creditors of Cayman companies were subservient to the interests of the allegedly insolvent firms.

However, the Court appears to be willing to seal virtually anything, as evidenced by the fact that a mundane application by Hong Kong Stock Exchange-listed Asia Investment Finance Group Ltd. to reduce its share capital was sealed for more than two months before being released recently even though the capital reduction had been publicly announced by the company itself nearly two months BEFORE the petition was even filed at the Grand Court on May 31st by law firm Conyers Dill & Pearman.

Neither Cayman's Chief Justice, Anthony Smellie, nor Court Administrator Suzanne Bothwell, who appears to be on a three-week vacation, responded to questions from OffshoreAlert, just like they failed to respond to questions prior to OffshoreAlert first exposing the Court's secret sealing practices last August, when we revealed that 55% of all FSD cases filed in the preceding two months were sealed and one-third for the first eight months of 2018.

The Court did, though, respond at the time to questions from the local Cayman Compass newspaper, falsely claiming that only 4% of cases had been sealed for the relevant period in 2018 and that, reported the Compass, "winding-up petitions are usually made public within 72 hours of their filing, after a judge determines that they have merit". Shortly after OffshoreAlert's exposé, the Court - without announcement - unsealed dozens of cases, mainly winding-up petitions, but has since reverted back to the mass sealing of cases.

The FSD was established on November 1st, 2009 to handle disputes in Cayman's financial sector, including those involving hedge funds, of which Cayman has more than any other jurisdiction in the world.

The Court's secrecy policy also extends to its Civil Division, where 28 of the 132 cases filed during for the first eight months of 2019 are sealed, at a rate of 21.2%, inviting the question of whether certain individuals and companies are being treated favorably.

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  • David Marchant
    By David Marchanton Monday, August 12, 2019 11:04:27 AM

    If investors in, and creditors of, Cayman Islands hedge funds and other firms need evidence of the contempt Cayman's judiciary has for them, read the above story. As an excuse to avoid regulatory scrutiny, Cayman claims that investors in the jurisdiction's hedge funds are "sophisticated" and, therefore, don't require much, if any, oversight. When it comes to letting them know about insolvency and fraud allegations against funds, however, those same investors are considered to be hillbillies who are too stupid to be told that the litigation even exists. Chief Justice Anthony Smellie has become a liability to the jurisdiction.

    We hunt for red flags in high-value, cross-border finance by monitoring offshore and onshore courts, regulatory actions, offering documents, and other sources - and email you the results.

    View Recent Digests

    Cayman Court Secrecy: A Huge Red Flag for Foreign Investors & Clients
    David Marchant
    As any fule kno, the biggest enemy of fraud, corruption, money laundering, and other forms of financial crime is transparency, while their best friend is secrecy. That's why the unprecedented mass sealing of cases that's taking place at the Financial Services Division of the Grand Court of the Cayman Islands is repugnant to anyone with a genuine concern for financial crime.