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CIMA denies getting Caledonian owners wrong

| 02/03/2015 | 23 Comments

(CNS): The local regulator has stated that it is “well aware of the various parties in the ownership structure of the Caledonian group”, refuting claims by the Miami-based watchdog, OffshoreAlert, that CIMA had named the wrong beneficial owner in the liquidation petition. Meanwhile, liquidators are looking for a buyer for the bank which was brought to its knees after US authorities filed suit over a $75 million penny stock scam.

Although job losses at the bank are expected, Keiran Hutchison and Claire Loebell of EY, who were appointed controllers by the Cayman Islands Monetary Authority (CIMA) and then confirmed as liquidators by the Grand Court, have begun the process of seeking the best way to protect the bank’s assets.

In a statement at the weekend they said they are “undertaking a thorough review” of the Caledonian bank and Caledonian securities operations”, taking in to account the best interests of all stakeholders, “including creditors, deposit holders and employees”.

Employees will continue to be paid under the terms of their contracts and are assisting the liquidators with preparations for efforts to sell the CBL and CSL businesses, Hutchison and Loebell added.

“Employees have been advised that redundancies are likely, and they are free to resign if they should choose to pursue other opportunities,” the pair stated, but the liquidators will be assisting the workers with a prospective new employer if they find a buyer for the beleaguered bank. “The Liquidators will continue to report their findings and are in the process of calling meetings of stakeholders. In the meantime, the operation of all services to the customers and clients of CBL and CSL remains suspended,” they added.

Concerns that CIMA had filed incorrect details about the ultimate owners of the bank were raised by OffshoreAlert last week, when they said 39-year-old Curacao-based attorney Gordon Casey was not the beneficial owner, despite the court filings by CIMA. In a lead report the website claimed that Casey denied being the bank’s real owner, pointing to 51-year-old Canadian national Terry Duffy, the head of Lionhart Advisors Group Ltd, a British Virgin Islands-domiciled, Toronto-based operator of hedge funds.

“I’ll confess to being very shocked to read that I was named as the UBO in the petition,” Carey told OffshoreAlert. He said the bank was owned by a trust and he didn’t know who the beneficiaries were.

CIMA had described Caledonian Bank as 100% owned by Caledonian Global Financial Services, which was in turn is 100% owned by New World Star Trust, a Cayman Islands domiciled company for which Sentinel Trust Services Ltd acts as Trustee. The regulators stated that Sentinel is also domiciled in Cayman and that is owned by Blackbriar Holdings Inc., a Cayman Islands domiciled company whose directors are Marta Miraglia and Gordon Casey, with Casey owning 100% interest in Blackbriar.

CIMA also named Kobi Dorenbush, Barry McQuain, Devandranauth Ramesh Shastri, Paul Muspratt, Jeremy Baird and Paul Byles, who resigned on 9 February days after the bank’s assets were frozen when the US Securities and Exchange Commission sued over the alleged scam.

Despite legal documents pointing to Casey and evidence that he may not be the beneficial owner, in a short email in response to enquiries from CNS Business, CIMA said they were well aware of the allegations made by the Miami watchdog but claimed the authority was well aware of the various parties.

With the question of beneficial ownership now at the heart of the latest criticisms of offshore financial centres by the leading onshore economies, any misunderstanding by the regulator over who really owns what at the bank would undermine claims that Cayman is well-versed in actual ownership.

The government has been at pains to stress publicly, and with the UK in particular, that it has extensive knowledge of beneficial owners of the entities registered here as it routinely collects this information and has done so for many years. In its fight to keep any beneficial ownership register it must create for the eyes of the relevant authorities only, Cayman has claimed that it already has a regime that not only meets the OECD’s international obligations on transparency and is superior to the information collected by most onshore countries.

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Category: Finance, Financial Services

Comments (23)

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  1. Anonymous says:

    Has anyone been arrested yet? When does this go from being a civil matter to a criminal matter? This was a crime, right?

    • Anonymous says:

      No, this was not a crime. The SEC is alleging that Caledonian Securities removed legends from share certificates improperly. But their claim is baseless. They have shown no evidence to support this. Even if this is proven, it is not a criminal act in the US. More importantly, the Cayman Islands has no laws or regulations on securities trading. So there is no provision in local law for anything like this. So, no, this is not a crime.
      People should also know that every single trade that Caledonian Securities has ever done went through a large US brokerage firm (household names, some of the biggest in the world). This means that the compliance departments of these large US firms also signed off on these trades. So why is Caledonian the only one in the spotlight?
      Stop making wild accusations and start asking important questions. Was this an attack on Caledonian, or an attack on Cayman?

      • Anonymous says:

        If Caledonian is innocent and the charges are baseless why did they run for cover to voluntary liquidation?

        • Gabriel Bush says:

          They did not “run for cover”. How would voluntary liquidation provide any “cover”? Any liquidator would be an officer of the court, not an agent of the company. They probably put it into liquidation after the SEC froze all their assets and depositors were demanding withdrawals. Liquidation would have been the only way to treat all parties fairly.
          By the way, people should take notice that the freeze on assets started at close to $400m and is now down to just $7m. Doesn’t that indicate something…

      • Anonymous says:

        I thought the most serious allegation was that Caledonian participated in the pump and dump scheme selling shares of the subject companies for Caledonian’s own account? That’s a crime for sure….

        • Gabriel Bush says:

          That is the allegation. But at NO POINT did Caledonian EVER trade in any of these stocks as principal. Caledonian Securities provides an execution service – meaning that they execute client orders. They do no trade as principal. This was the SEC’s allegation in order to get a court order to freeze all of Caledonian’s assets. But there has been absolutely no evidence to show that Caledonian has ever traded any of these stocks for their own account.

  2. Anonymous says:

    Everyone is so quick to look for a sinister explanation when in fact the truth is very simple. Casey is the owner of a trust company. The trust company acts as trustee of the shares of Caledonian on behalf of the ultimate beneficial owners of Caledonian. Is this really so complicated? Aren’t some shares of RBC or ScotiaBank held by trustees (mutual funds, pension funds…) on behalf of their clients? CIMA is definitely aware of this structure. If they inadvertently referred to Casey as the UBO, it was probably an innocent error and they should just say so. People should stop attacking Caledonian’s management and ownership. A foreign regulator has made a mere, unproven allegation against Caledonian which put it out of business. The SEC has yet to show any evidence to support their claims. So how about people start supporting a Caymanian business that has supported the local community for 45 years.

    • Garfield says:

      But there is no denying that the SEC has a very good record of successful prosecutions on the Securities Fraud side in the last few years. I doubt it would have gone this far if the SEC did not think they had a slam dunk case.

      • Anonymous says:

        The SEC has had a record of making a lot of accusations and settling out of court in order to generate income. Just because someone makes an accusation, doesn’t mean that the accused person is guilty. Don’t we have a presumption of innocence?
        Fact: the SEC went to court in New York on an ex parte basis (meaning that they didn’t even tell Caledonian) and convinced a judge to freeze $400 million in Caledonian’s asset, even though the SEC was claiming only $76 million. Why did the SEC freeze 5 times more money than they were claiming? Why did they freeze anything at all? The SEC made an allegation and began a civil law suit. But a party is NOT entitled to freeze another persons’s assets just because they want to sue them.
        Search online for the transcript of the hearing. The SEC lawyer misleads the judge and when asked if the other defendants have any assets in the US, the SEC attorney replies that the other defendants don’t have any money in the US, but Caledonian Bank does.
        The SEC went after Caledonian because it was an easy target. Not because they did anything wrong.

      • Gabriel Bush says:

        You doubt that the SEC would go “this far” if it didn’t have a “slam dunk case”? Really? Cayman is their new pet project in the way that Switzerland was a few years ago. Of course they would go “this far” for any reason or for no reason. Wake up. This is a sign of things to come for all of us.
        And what do you have to say now about the freeze on assets being only $7m now? They started at almost $400 and now just $7m. Doesn’t that indicate the strength/weakness of their claim?

    • Anonymous says:

      No issue with the first 40 years…

  3. CIMA acts like it doesn’t know how the offshore world works. It should know that the use of nominees is widespread. That someone’s name appears on a register of members doesn’t necessarily mean that they are the ultimate beneficial owner. There’s nothing to indicate that Gordon Casey is the UBO of Caledonian Bank. His firm provides services to hedge funds and a hedge fund operator being the UBO.

    • Anonymous says:

      Really? everyone in the banking world knows that UBOs must be pre-approved by CIMA. The bank would have had to provide full structure charts to CIMA indicating all legal and beneficial ownership. Which means that either Caleodonian lied to CIMA about the true ownership structure, or Gordon Casey is lying now to avoid

      In your haste to blame CIMA, looks like you’re looking at the least likely scenario – that CIMA is filled with mentally incompetent boobs who don’t even understand their own laws – over the most likely one – that Caldonians owners and senior management, that are desperately trying to avoid the consequences of their actions, are throwing out every cockamamie story they can and hope one sticks.

      • Terry Duffy’s own attorney stated in a U. S. court filing last year in an unrelated case that Duffy controlled the Caledonian Group, which is supported by other evidence independent of the attorney, including, I might add, the evidence of common sense.

        If CIMA genuinely believes that Gordon Casey was the UBO of the bank, why did it approve him since there’s nothing to indicate that he has substantial financial means. Given that his firm provides services to hedge funds, CIMA should have known he was probably acting as a nominee,

        Also, why did CIMA approve of the complicated ownership structure in general, regardless of who may or may not be the UBO?

      • Anonymous says:

        ‘that CIMA is filled with mentally incompetent boobs who don’t even understand their own laws’ – seriously, you think that’s the least likely scenario…

        the story David reports is based on a disclosure from CIMA, not Caledonian

        Gordon Casey appears to be acting on behalf of the trustee here, so there would be beneficiaries to the trust i assume, ie the true beneficial owners of Caledonian, and as as you say, this would have been fully disclosed to CIMA

        • Anonymous says:

          In this article, Casey himself says he “doesn’t know who the beneficial owners are”. So he has agreed to act as the owner of a large financial services group but never bothered to find out who it was he was acting for.

          • Anonymous says:

            as trustee he would be bound by confidentiality and would be under an obligation not to disclose that information, but am sure he would have that on file

    • Anonymous says:

      There is still no further mention of ‘New World Holdings Inc.’ or ‘New World Star Trust’ and the alleged Ultimate Beneficial Owner, Mr. Terry Duffy of Canada. Anyone know what’s going on with this part of the Caledonian matter?

      • Anonymous says:

        @ “Anonymous 9:58 pm” – Don’t wait on CIMA or the Cayman’s Government to provide a response to these questions. They are not in the business of full disclosure/transparency, so these answers won’t easily be forthcoming. So, you will be better off looking to non-localized media sources for truth.

  4. Anonymous says:

    Whatever the relity CIMA has to appreciate that we have to be SEEN to be transparent.This structure should not have been allowed to operate in Cayman

  5. guest says:

    On the face of it the ownership structure appears to be intentionally obscure, thankfully the ownership of the larger Cayman Banks aren’t as complicated.

    • Anonymous says:

      The Cayman Islands is in the business of providing high net worth people from around the world with lawful means of protecting their assets. Caledonian’s structure, while complicated to the layperson, simply makes use of the very tools that the Cayman Islands itself sells to others. Nothing sinister, nothing convoluted and nothing hidden. CIMA was fully aware of it.

      • Anonymous says:

        How were those assets acquired?
        Who, and what, are they hiding them from?

        CIMA should be ashame of themselves!!!!!

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