BVI Domiciled Hedge Fund Files For Chapter 11 Protection

by Philip Morton, Investors Offshore.com

13 May 2003

The BVI-based Lancer Offshore hedge fund has filed for Chapter 11 protection, the first time that a hedge fund has ever done so, according to reports.

The United States and the British Virgin Islands share jurisdiction over the Lancer Offshore Fund, as it has offices in New York but is registered as an offshore hedge fund in Tortola.

Chapter 11 protection is designed to protect US companies from their creditors whilst they reorganise. However, amid growing concerns that securities fraud has taken place, observers have suggested that the chances of the fund reorganising are becoming increasingly slim.

The British Virgin Islands Financial Services Commission (FSC) filed an application to place the two parent companies of the hedge fund, Lancer Offshore, and the Omnifund, into administration at the beginning of this month. According to reports, a hearing on the application has been put back until May 30 whilst objections are filed.

However, if the bankruptcy applications are successful, investors in the fund could see losses of around $850 million.

Citing complaints made by investors over the administration of the hedge fund, the BVI FSC explained that: 'The Commission is of the opinion that the defendants are carrying on or are likely to be carrying on business in a manner detrimental to the interests of its investors.'

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