Investment Fund Clawback Claims in the Cayman Islands

In this article, first published in INSOL World Q4 2020, Peter Hayden, Harry Rasmussen and Adam Barrie discuss investment fund clawback claims. 

Attempts to claw back moneys into a liquidation estate feature commonly in insolvency procedures around the world. Following the Global Financial Crisis of 2008, many high-profile claims were pursued, perhaps most notably in the Madoff liquidation, where the Trustee appointed in the United States has had considerable success, eventually clawing back around US$14.364 billion.

Many investment funds use offshore structures, with the Cayman Islands being the dominant choice. This article considers clawback claims in the context of investment funds set up in the Cayman Islands, although similar remedies are available in other offshore jurisdictions. The Cayman Islands is regularly used by sophisticated commercial parties and, perhaps unsurprisingly, its courts have tended towards upholding legal agreements and providing certainty.