Caledonian, SEC close to settling US suit

Attorneys for the U.S. Securities and Exchange Commission say they have reached an agreement to settle accusations of a penny stock pump-and-dump scheme involving Caledonian Bank, according to a letter to the federal judge assigned to the case in the United States. 

The deal must be approved by the SEC and by the Grand Court of the Cayman Islands before it can go back before the U.S. judge. 

Caledonian Bank collapsed after the SEC filed suit in February. The U.S. government initially froze more than $75 million of the small bank’s assets, causing a run on the bank and bankruptcy for the Cayman-based financial institution. Caledonian’s various entities are now in liquidation in Cayman. 

Joint Official Liquidator Keiran Hutchison, with Ernst & Young, sent a letter to Caledonian creditors Friday, the same day the SEC filed its letter with the U.S. court, to tell creditors about the progress in settling the lawsuit. 

In the Aug. 21 letter, Mr. Hutchison writes, “The [joint official liquidators] cannot divulge any details of the proposed settlement terms at this time but are hopeful that a disclosure can be made to the creditors and clients of the Companies in the near future.” 

SEC attorneys asked U.S. District Court Judge William Pauley to delay the next filing deadline from this week to Oct. 30 to give the parties time to finalize the settlement and get approval from U.S. authorities and the Grand Court here. 

The SEC lawsuit, filed in the Southern District of New York, accuses Caledonian Bank and Caledonian Securities, both based in Cayman, Legacy Global Markets and Clear Water Securities in Belize, and Panamanian company Verdmont Capital of securities violations in the U.S. 

U.S. regulators accused the brokerages of selling restricted securities as free-trading stock to the public. 

The complaint alleges that the penny stocks were issued by essentially worthless companies and manipulated in pump-and-dump schemes. The SEC said the perpetrators made about $75 million from the fraud. 

Caledonian House on Dr. Roy’s Drive, George Town. – PHOTO: TANEOS RAMSAY

Caledonian House on Dr. Roy’s Drive, George Town. – PHOTO: TANEOS RAMSAY