LM Fund One liquidators seek Chapter 15 recognition

November 07, 2024

Originally posted on Global Restructuring Review

The Cayman-based joint official liquidators of a bankrupt mutual fund have asked a Florida court to recognise their appointments so they can conduct discovery and take control of assets that may be in the US, five months after they launched proceedings against the fund’s bank in California.
On 6 September, KRyS Global executive chairman and founder Kenneth Krys and partner Mark Longbottom, the JOLs of LM Fund One, petitioned the US Bankruptcy Court for the Southern District of Florida for Chapter 15 relief.
With counsel from Akerman partner Andrea Hartley, the JOLs said they require recognition of LM Fund’s Cayman liquidation so they can conduct discovery in the US to aid their asset recovery efforts for creditors.
The filing comes five months after the JOLs launched discovery proceedings against LM Fund’s US bank, East West Bank, in the US District Court for the Southern District of California for discovery in aid of a foreign proceeding.
According to the JOLs first report to the Cayman court in November, LM Fund held one bank account with East West Bank in California, which was the same account investors paid their subscription monies to.
But the JOLs said they were informed that the company’s bank account was closed when they contacted the bank, which told them that it was unable to provide bank statements or other documents without a US court order or subpoena.
Longbottom said in a declaration filed with the Florida court that East West Bank produced documents in the California action that revealed it would be necessary for the JOLs to conduct further discovery to obtain more details about the debtor’s financial transactions.
Founded in 2017, LM Fund was a mutual fund registered with the Cayman Islands Monetary Authority with a mission to employ alternative investment strategies, either directly or through underlying funds, to provide risk-adjusted returns to investors.
Ning Du, an investor in the fund, petitioned the Grand Court to wind it up in September last year after being unable to redeem her investment and the fund’s repeated failure to provide requested financial statements.
The Grand Court issued a winding up order the following month and appointed Longbottom and former KRyS senior manager Michael Lam as JOLs. Lam was replaced by Krys after departing KRyS Global for a partner position at Arkus Advisory in July.

In their first report in November, the JOLs said the debtors’ liquidation estate did not have sufficient funds at the time to allow them to seek Chapter 15 recognition to conduct discovery in relation to the fund’s closed account at East West Bank.
The JOLs noted in the first report that the fund was owed US$12.6 million by Indonesia-based PT Nowrupiah that it advanced for working capital purposes.
The liquidators did not respond to GRR’s request for comment in relation to whether the loan has been repaid or whether the Chapter 15 case is being financed by an external source.
A recognition hearing in Florida has been scheduled for 30 September.

  • In the US District Court for the Southern District of Florida

    • Judge Laurel Isicoff
    Foreign representative to LM Fund One
  • KRyS Global

    • Executive chairman and founder Kenneth Krys and partner Mark Longbottom in the Cayman Islands
    Counsel to the foreign representative
  • Akerman

    • Partner Andrea Hartley in Miami
    In the Grand Court of the Cayman Islands
  • Justice Ian Kawaley

    • Joint Official Liquidators for LM Fund One
  • KRyS Global

    • Executive chairman and founder Kenneth Krys and partner Mark Longbottom in the Cayman Islands
    Counsel to the foreign representative
  • Nelsons Legal

    • Partner John Harris in the Cayman Islands