Court rejects Caledonian bank liquidation

| 12/02/2015 | 13 Comments

(CNS Business): Attempts by Caledonian Bank to place it and Caledonian Securities in voluntary liquidation under its own appointed liquidators have been rejected by the Cayman Islands Grand Court, which has upheld the appointment of the local regulator’s controllers. During a hearing on Thursday morning the chief justice described the appointment of the joint voluntary liquidators as a blank shot fired by the bank, which could not override the appointment by CIMA of two Ernst & Young auditors to take over its affairs.Keiran Hutchison and Claire Loebell, appointed on Tuesday, will now continue their review of the bank’s financial situation and make a report to the Cayman Islands Monetary Authority (CIMA) shortly.

Following allegations by the US Securities and Exchange Commission that it was involved in a $75 million penny stock scam, the bank’s shareholder appointed its own liquidators yesterday. But in the court today Chief Justice Anthony Smellie confirmed CIMA’s power to appoint the controllers under Section 18 of the Banks and Trust Companies Law, and found that the appointment of the joint voluntary liquidators was a brutum fulmen, or a blank shot, having no effect in law over the affairs of the licensee.

Maples and Calder made the application on behalf of the voluntary liquidators but the court ruling means that the appointment of the controllers by CIMA puts the bank in their control. Once the controllers report their initial findings on the status of the entities to both CIMA and the court, the authority will then be in a position to determine what further action to take in the interest of the relevant stakeholders, CIMA said in a release Thursday.

Caledonian is one of the Cayman Islands’ oldest offshore banks but it has been brought to its knees by the SEC filing and revelations that it was allegedly involved in the scam, and the doors of the 45-year-old bank are likely to close for good in the coming weeks.

While the situation faced by the bank’s creditors, depositors, investors and clients, as well as its 65 plus employees, looks bleak, the allegations against the bank and the subsequent appointment of controllers does not bode well for the local financial services industry and Cayman’s reputation abroad.

Industry insiders are already stating that the issue will have a knock-on effect and could impact financial clients in the United States who continue to be nervous about dealing with private banks in offshore financial jurisdictions.

The bank was established by the late William Walker back in 1970 but was purchased by New World Holdings Inc, a privately held investment company based here in the Cayman Islands, less than four years ago. Following a brief statement on Monday stating that the bank was cooperating with SEC, the management team at Caledonian has made no further comment about the situation.

In the wake of today’s legal proceedings, CIMA said interested parties should contact the controllers via Barry MacManus at barry.macmanus@ky.ey.com.

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Category: Finance, Financial Services

Comments (13)

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  1. Not just 67 employees in the Cayman Island. We are a small company with 25 employees. All our funds are received by CBL. We do not specultate. This means we go out of business XXXXX. Nobody is prepared to tell us what is going on. Jail would be too easy for trhese people and the totally useless authorities.

    • Purcable says:

      You speculated by working with such a small firm.

      • … and you also specultated by involving yourself with a little offshore bank that may have been involved with pump and dump schemes for some years now- a quick google search should have revealed enough to ruin your day (or week or maybe month). Purcable is right- stay with the big boys such as Honkers & Shankers- at least they are too big to be shut down by SEC, CIMA or their own embarrassed shareholders!

  2. C'Mon Now! says:

    The bank lost it’s correspondent banking relationship because of the SEC suit and will also be made insolvent by the expected fine(s). The bank may still meet depositors demands depending on the outcome of the liquidation but after it lost access to the US financial it was in no way a going concern. Yu can blame CIMA for any number of things but appointing it own Controller to oversee the liquidation rather than allowing a liquidator hand picked by the shareholders is not one of them.

    • Anonymous says:

      That’s what happens when you get caught accessing US markets to gain unfair economic advantage, by manipulating processes and defying SEC regulations.
      Not to mention, the consistent engagement of false advertisement/publication of its “shell” operations.
      Now, both Caledonian Group and Lionhart Advisors Group have disclaimer prompts on its official websites.

      http://www.caledonian.com
      http://www.lionhart.net

      The USDOJ & SEC’s message was loud and clear.

  3. Letemburn says:

    If they were allowed to voluntarily liquidate would this have meant shareholders and perhaps some directors would have been able to profit? Perhaps maybe even avoid prosecution for what appears to have been a financial crime. Also did the original owners have anything to do with this and were any of them still part of the bank?

  4. Fred says:

    I’m really puzzled. Why would allegations of involvement in a scam lead the shareholders to attempt a voluntary liquidation? That doesn’t add up. Also I don’t remember this Bank having any real activities 45 years ago. I think it only ever got its first banking licence in the early 80s – a little over 30 years ago.

    CNS can you not identify who is behind New World Holdings Inc, the recent owners of Caledonian? And is it still connected to Walkers in any way?

    • Anonymous says:

      This is the right question. Who is New World Holding? Where did they come from? Who are they? What else are they involved in? What else have they done?

      • Anonymous says:

        Don’t expect prompt or truthful revelations to these questions from CIMA or the Minister, in charge. Your best option to the find non-localized media to obtain this information. Cayman news publications have too many omissions, or distortions, of facts.

    • Anonymous says:

      Your best bet is to wait until it’s published by the non-localized media. Don’t expect CIMA or the Minister, in charge, to be forthcoming with this information. Criminal Exposure and Truth are forbidden in the Caymans – well, for the most part.

  5. Anonymous says:

    CIMA should be ashamed. The bank was liquid and was able meet the depositors demands, but CIMA wanted to hear none of if, Caledonian has been accused not convicted of the allegations made. Instead they just pulled the plug, such a knee jerk reaction.

    Now not only 67 employees are out of a job, at least half of which were Caymanian, they have have managed to ruin their own country’s reputation and that of financial institutions of this island worked so hard to build. The stigma is bigger than ever.

    The unemployment rate just increased, thanks CIMA, maybe next time you could wait more that 24 hours to decide to ruin people life.

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