The situation regarding the Axiom Legal Financing Fund has become increasingly farcical.
As previously reported in this blog, US-based OffshoreAlert has made a series of very serious allegations, claiming publicly that the Fund appears to be a Ponzi scheme and warning investors that they have been victims of a massive fraud. The Fund directors have denied any wrong-doing and brought KPMG in to investigate, although the publication of their findings has been delayed. In the meantime, redemptions and subscriptions from the Fund have been suspended, Tim Schools, the founder of the Fund and former boss of its investment manager, Tangerine, has been replaced as its head as a consequence of the allegations, and Tangerine itself has been sacked as investment manager of the Fund. And to ramp up the pressure a notch further, Tim Schools has now commenced legal proceedings in the UK to sue OffshoreAlert for defamation. The whole sorry scenario is being played out in public, through blog posts, social media and published correspondence between the protagonists.
Spare a thought in all this for the investors who have invested in good faith in the award-winning Fund and who have no idea who to believe as the pressure increases. I have been contacted by one such individual, who has asked whether there is any likelihood of him getting his money back. The truth is that I have no idea. The specifics of the allegations being made by OffshoreAlert are fairly detailed and on the face of them certainly merit a thorough and independent review, but they are being robustly denied by all involved and it would be dangerous simply to accept them at face value. If they are true, then the investors and those involved in advising the Fund could potentially lose very significant sums of money. If they are false, then doubtless huge damage will have been done to a Fund which may struggle ever fully to recover.
Whilst the whole sorry saga is being played out, there has been a striking lack of comment from the Cayman Islands authorities. Surely now it is time for them to launch their own investigation? Given the size of the Fund (over £100 million), the very public and serious nature of the allegations, I do not think it is sufficient comfort for the investors to have the directors organising an investigation (albeit by a third party) into what, if anything, has happened. Whilst the directors were absolutely right to launch their own investigation, they cannot be seen as entirely impartial as there may be implications for them if the allegations are substantiated. Investors may, therefore, not be entirely satisfied with the outcome of a review where the terms of reference are set by the Fund's directors, and they are the recipients of the report.
In my view, it is time for CIMA or the Cayman Islands police to be seen to take control of an investigation into whether there is any truth in the allegations, as a matter of urgency. This is not because I believe that a fraud has been committed - as I have said earlier, I simply do not have sufficient facts available to know - but because the current very unsatisfactory situation should not be permitted to persist. The reputation of the Fund, its advisers, and the Cayman Islands regulator are all at stake.
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