(CMR) Financial advisers in Bermuda and the Bahamas and seven insurers and investment funds in the Cayman Islands have been accused of perpetrating a $135 million fraud against an insurer in the United States.
The allegation was made in a complaint that was filed at federal court in Manhattan yesterday by Great Western Insurance Company, a Utah-domiciled insurer that provides life insurance and annuities to fund pre-arranged funeral plans.
Defendants are Gregory Tolaram, of Bermuda; Edward Brendan Lynch, of the Bahamas; Alpha Re Limited, Alpha Re Holdings (Cayman) Limited, Atlantic Specialty Finance, Blue Elite Fund LP, Blue Elite Fund Ltd., Blue II Ltd., and Sancus Capital Blue Credit Opportunities Fund Ltd., all of the Cayman Islands; John Drake, of Ontario, Canada; Mark Graham, Donald Solow, Ability Insurance Company, Blue Alternative Asset Management, LLC, Blue Capital Management, Inc., Christiana Trust, Cygnet 001 Master Trust, Cygnet 001 Master Trust Series 2011-A, Cygnet 001 Master Trust Series 2011-C, Cygnet 001 Master Trust Series 2013-A, Regatta Holdings LLC, and Wilmington Savings Fund Society, FSB, all of the United States.
“This is an action for damages stemming from systematic breaches of fiduciary duty, fraud, and other misconduct resulting in losses to Great Western that are in excess of $135 million,” it was alleged in the complaint.
Great Western deposited $152 million into a trust account in return for reinsurance that was initially provided by Ability Reinsurance (Bermuda) Limited and then by Alpha Re, it was claimed in the complaint.
Great Western claims that it “does not know the whereabouts” of “over $135 million that should be in the Trust Account” and accused the defendants of providing it with false statements in an attempt to conceal their “misconduct, breaches of fiduciary duty, and fraudulent activity”.
As previously reported by OffshoreAlert, Alpha Re went into voluntary liquidation in Cayman on January 16th, 2018 shortly after the same federal court in Manhattan upheld a $127 million arbitration award that Great Western had obtained in New York.
Alpha Re Limited was formed in Cayman on February 10th, 2011. In a court filing, Alpha Re stated that its directors “are based in Bermuda, the Bahamas and Canada” and, on its website at www.alphare.ky, the company's directors were identified as Edward Lynch, who is described as president of E D Management Limited, in the Bahamas, and Gregory Tolaram, who is described as Managing Director of Mercury Group Limited, in Bermuda. There is no mention of John Drake, who was described as a director in Alpha Re's petition to the Grand Court. “Alpha Re Limited is minority-owned by two experienced insurance and investment management professionals and majority-owned by Alpha Re Holdings (Cayman) Ltd.,” it was stated on the website.
The captive's managers were identified as Tolaram, as Chief Operating Officer; Steve Britton, Senior Underwriting Officer, and Adrian Lynch, of Aon Insurance Managers (Cayman) Ltd. The company formed a U.S. subsidiary, Alpha Re (U.S.) Inc., in Vermont in November 2015. In an audit for the year ended December 31st, 2014, Alpha Re Limited claimed to have assets totaling $285 million, of which $17.6 million was in cash and cash equivalents, and liabilities of $226 million.