The US Bankruptcy Court’s Chapter 15 Order of Foreign Main Recognition in Fairfield Liquidation Proceedings Is Affirmed

Press Release–Kenneth M Krys and Joanna Lau of KRyS Global, the Joint Liquidators of Fairfield Sentry Ltd., Fairfield Sigma Ltd. and Fairfield Lambda Ltd., announce another important decision in the Fairfield Funds’ liquidation proceedings.

In a decision dated September 15, 2011 and entered on the docket on September 16, 2011, U.S. District Judge George B. Daniels of the U.S. District Court for the Southern District of New York affirmed the July 22, 2010 decision of the Bankruptcy Court recognizing Fairfield Sentry’s liquidation proceeding in the British Virgin Islands (“BVI”) as a “foreign main proceeding” under Chapter 15 of the U.S. Bankruptcy Code, which entitled the Joint Liquidators to cooperation and assistance of U.S. courts in aid of their recovery efforts on behalf of Sentry’s stakeholders.

The Bankruptcy Court’s decision was challenged by parties (the “Appellants”) to a purported derivative action (the “Derivative Action”) alleged to have been brought in the name of Fairfield Sentry. The Derivative Action was stayed as a result of and by the Bankruptcy Court’s decision. On appeal, the Appellants argued that the Bankruptcy Court erred in determining that Sentry’s center of main interests, or “COMI”, is in the BVI. The Appellants contended that Sentry’s COMI is in the United States, and specifically New York. The Appellants also contended that granting recognition of the BVI liquidation proceedings was contrary to U.S. public policy due to, among other things, a sealing order entered in by the court overseeing the BVI liquidation proceedings to protect information contained in the court file that includes litigation strategy or is otherwise confidential or privileged.

The District Court denied Appellants’ appeal in its entirety, determining that there was “significant evidence in the record” supporting the Bankruptcy Court’s finding that Sentry’s center of main interests is in the BVI. The District Court also rejected the Appellants’ argument that recognition of Sentry’s BVI liquidation proceedings is contrary to U.S. public policy.

Kenneth Krys, a licensed insolvency practitioner of the British Virgin Islands and one of the Joint Liquidators of the Fairfield Funds, said of the District Court’s decision: “We are very pleased with the District Court’s affirmance of the Bankruptcy Court’s recognition order. This important decision provides the Joint Liquidators with continued access to and assistance from United States courts in fulfilling their duties to obtain recoveries for Sentry’s stakeholders in this complex, international liquidation.” Fairfield Sentry Limited and its affiliated funds Fairfield Sigma Limited and Fairfield Lambda Limited were the largest ‘feeder’ funds into the Bernard Madoff Ponzi Scheme.

The Joint Liquidators were represented in this matter by their U.S. Attorneys, David J. Molton and Daniel J. Saval of Brown Rudnick LLP