The Royal Court of Guernsey yesterday confirmed that “non-parties” seeking to be joined to current litigation must satisfy certain tests before being allowed to join proceedings, according to a statement issued by Carey Olsen, which acted for the liquidators. The liquidators wanted to repatriate assets held in accounts in Guernsey to the BVI and Anguilla so that the liquidation could go ahead.

“The ultimate aim is to distribute the surplus assets of those entities forced into liquidation to their respective creditors and investors. The US Securities and Exchange Commission and the US Commodity Futures Trading Commission were seeking to cut across the hedge funds’ liquidations and have those same assets repatriated to the US in an effort to pay back creditors and investors in different entities also involved in an allegedly fraudulent scheme,” the law firm said.

EFG Private Bank issued interpleader proceedings to determine the competing rights and claims over the assets it holds in Guernsey on behalf of the hedge funds.

Civil complaints, brought by the SEC and the CFTC in the US, led to the need for interpleader proceedings. Both regulators filed similar complaints against Nikolai Battoo as a consequence of the allegedly fraudulent scheme which aimed to mask losses incurred in certain feeder funds’ investments to the Bernard Madoff Ponzi scheme and others; Battoo allegedly induced investors to plough further funds into the investment portfolios, or not to redeem their investments, on the back of misleading investment performance reports, the Carey Olsen statement said.

The CFTC appointed a receiver over Battoo’s assets and entities, and liquidators were appointed in the Bahamas over two Panamanian entities named in the US proceedings .

Efforts to repatriate the hedge funds’ assets and other moves were delayed by the US Receiver and the Bahamian liquidators on the basis that some of the investors in the Battoo entities may also have claims over some of the assets.

“However, despite asserting such claims in correspondence, no evidence or detail of these claims has yet been filed with the Royal Court or, more properly, in the liquidations four months after proceedings started and nearly a year after the receiver was appointed,” Carey Olsen said.