The position is clear in the United States. Investors who lose money in mutual funds operated as Ponzi schemes when they collapse have a well-grounded expectation that those who took out money before the collapse will be required to pay back what they took out. The money goes to the fund’s trustee in bankruptcy and gets shared between all victims, without distinction between those who got out before the collapse and those who were still in. Two decisions last year in the English common law world suggest the beginnings of a significant divergence between the treatment of Ponzi frauds in the U.S. and in the English common law world. That would be surprising and unwelcome.

The seed of schism was sown in April 2014 when the Privy Council (one of the highest judicial tribunals in England and Wales) remarked in Fairfield Sentry v. Migani [2014] UKPC 9:

It is inherent in a Ponzi scheme that those who withdraw their funds before the scheme collapses escape without loss, and quite possibly with substantial fictitious profits. The loss falls entirely on those investors whose funds are still invested when the money runs out and the scheme fails.

Read More

Type

Insight

Locations

Cayman Islands

Share
Twitter LinkedIn Email Save as PDF
More Publications
1 Jun 2022

The 2022 Cayman Islands Real Estate Guide

The Real Estate 2022 guide provides the latest legal information on the impact of disruptive technol...

Contributors: Norman Klein
28 Apr 2022

Restructuring the offshore debt of Chinese Real Estate Developers

This article sets out how the current regimes in the Cayman Islands and the BVI can assist with rest...

Contributors: Crystal Au-Yeung
28 Apr 2022

Assignment, novation or sub-participation of loans             

Transfers of loan portfolios between lending institutions have always been commonplace in the financ...

26 Jan 2022

Appleby contributes four chapters to Global Legal Insights – Fund Finance 2022: Cayman Islands

2021 has been an incredibly impressive year for the global subscription credit and fund finance mark...

Contributors: Georgina Pullinger
27 Oct 2021

We hope this registers! A summary of Cayman corporate and partnership registers in a finance transaction.

Because we know that it can be a little befuddling, Appleby has set out a guide to the various Cayma...

7 Oct 2021

Regulatory Round-Up: Cayman Islands Q3 2021

Appleby Cayman’s Our latest Regulatory updates for the Cayman Islands up to Q3 2021.

13 Sep 2021

Loans & Secured Financing in the Cayman Islands 2021

First published in Getting the Deal Through 2021. This practice guide provides topical analysis of L...

Contributors: Alexandra Simpson
21 May 2021

2021 - A Jekyll and Hyde Year for SPACs

In this article we offer our views on why this has happened and look ahead to the future for SPACs a...

Contributors: Dean Bennett
13 May 2021

The 2021 Cayman Islands Real Estate Guide

The Real Estate 2021 guide provides the latest legal information on the impact of disruptive technol...

Contributors: Norman Klein
13 May 2021

British Virgin Islands: Mergers & Acquisitions Comparative Guide

This country-specific Q&A provides an overview to Mergers & Acquisitions laws and regulati...

Contributors: Brittany Cummings