Over a period of at least 17 years, Bernard L. Madoff operated what is likely the largest Ponzi scheme in history. The financial fraud has given rise to claims and litigation in various jurisdictions, including the Cayman Islands, where liquidators have been seeking to recover assets for distribution to investors. The Cayman Islands Court of Appeal (CICA) recently held that the relevant legislative provisions do not empower an official liquidator to go behind a contractually binding (but misstated) net asset value (NAV), even where it is based on fictitious profits, and substitute a correct NAV in its place. The CICA’s approach is in line with recent Privy Council authority, favoring certainty for investors over open-ended liability to repay redemption monies received. In a guest article, Nick Hoffman and Paul Madden, partner and senior associate, respectively, at Harneys, provide an overview of the history of the case and discuss the CICA’s holding that applicable law did not permit the liquidator of the fund to change the fund’s NAV. Viewed as a victory for investors in Cayman Islands funds, this decision serves as a reminder to advisers of the importance of understanding a fund’s formation and offering documents, which in many cases will be respected and enforced by the courts. For more on the Madoff fraud, see “Can the Madoff Trustee Recover Disbursements of Fictitious Investment Returns Made to ‘Remote’ Transferees?” (May 27, 2009); “Certain Madoff Investors May Find Themselves in an Unusual Dual Role – As Potential Lawsuit Plaintiffs or SIPA Claimants, but Also As Potential Clawback Defendants” (Mar. 4, 2009); and “Involvement of Funds of Funds in Alleged Madoff Fraud Reemphasizes Importance of Due Diligence” (Dec. 24, 2008).