Coinful Capital Fund - Case Update

The Federal Court of Australia has recognised the Cayman Islands liquidation proceedings of Coinful Capital Fund (CCF) and Coinful Capital Master Fund (CCMF) as foreign main proceedings, notwithstanding that the usual pari passu principle of asset distribution will not be followed in the proceedings.

CCF and CCMF are segregated portfolio companies (SPCs), a Cayman Islands structure that allows for separate portfolios of assets and liabilities under a single legal entity. Each company had operated investment funds and engaged Lazarus Securities, an Australian firm, to manage and reinvest its assets. Lazarus received over USD $7.6 million in fees between 2022 and 2023.

The liquidators, Nicola Cowan and Kieran Clarke of FFP, sought recognition in Australia to investigate the affairs of the companies, including potential claims against Lazarus and its directors. Their investigations stemmed from allegations of asset dissipation and unaccounted-for funds, particularly following the companies’ restructuring into a master-feeder investment structure.

The Court considered whether the SPC structure, which modifies the usual pari passu principle of asset distribution in insolvency, disqualified the proceedings from being considered "collective judicial proceedings" under the UNCITRAL Model Law. While acknowledging that “the ground may be relatively untrodden”, the Court held that the SPC structure did not disqualify recognition, as the liquidation still affected creditors collectively and complied with the Model Law’s definition of a “foreign proceeding”.

The Court also issued ancillary relief, allowing the liquidators to stay proceedings against the companies in Australia, take control of Australian-based assets, and conduct examinations of Lazarus directors. The Court concluded that this was necessary to protect the companies' assets and creditors and aligned with the purpose of the Model Law in facilitating cross-border cooperation and insolvency administration.

Read the decision HERE.

Professionals involved:

• Daniel Neggo of University Chambers (instructed by Macpherson Kelley) for the liquidators, Nicola Cowan and Kieran Clarke of FFP