KRyS Global was appointed liquidator over a group of 22 Cayman Islands hedge funds, established to replicate the Standard & Poor’s hedge fund index. Each investment strategy was represented by one master fund and one segregated portfolio company (SPC). The funds collapsed as a result of losses suffered following a major fraud perpetrated by the SPhinX’s securities broker, Refco.

Due to the three tier fund structure employed by SPhinX (feeder funds, master funds and portfolio funds), and the comingling of assets between the various funds, numerous issues arose relating to ownership of assets and liabilities.

Making things worse, the SPhinX had issued “in-kind” shares in place of redemption payments prior to the liquidation. This further complicated the already complex creditor/shareholder structure.

In addition, KRyS Global was forced to consider the quantum of reserves to be set aside for potential contingent indemnity creditors arising from litigation commenced by the liquidators against certain service providers. The sum could have been significant, impeding any distribution to shareholders.

In total, KRyS Global identified 23 specific issues that would need to be resolved before any distribution could be made.


Early in the liquidation, the committee representing the interests of creditors and shareholders sought to negotiate a compromise of the issues. KRyS Global participated in this committee debate and sought to represent the best interests of the whole creditor and shareholder constituency in an effort to find a compromise.

Ultimately, the settlement efforts were unsuccessful. KRyS Global sought court direction on the way to proceed and litigation of the 23 issues was directed.

This litigation strategy caused many of the major stakeholders to reassess their positions and revisit whether a compromise of the issues was in their best interest. Terms of a compromise were ultimately agreed via a Scheme of Arrangement, which was sanctioned by the court.


KRyS Global added value to the process by utilising its significant investigative expertise to identify the issues to be resolved, and by providing the committee with the information and analysis it needed to debate and negotiate the terms of an acceptable compromise.

KRyS Global did not succumb to the influence of any particular creditor or group of creditors but kept the larger interests of the whole constituency in mind. When settlement proved unsuccessful, KRyS Global involved the court and was able to obtain authority to move the process forward, resulting in renewed settlement discussions. Ultimately a compromise of the issues was attained, avoiding years of expensive litigation.