On July 19, 2016, the Cayman Islands Court of Appeal (CICA) delivered an important decision in the litigation between liquidators of the Herald Fund SPC and the Primeo Fund, each of which were directly or indirectly feeder funds in the Ponzi scheme run by Bernard Madoff. The CICA’s ruling changes the law on priorities in insolvencies, clarifying where redeemed investors rank relative to outside creditors. However, the decision also calls into question the scope and application of the Cayman Islands statute governing redemptions by fund investors. It is vital for managers of – and investors in – Cayman Islands hedge funds facing liquidity problems to consider the CICA’s findings going forward. In a guest article, Jeremy Walton and Paul Kennedy, partner and senior associate, respectively, at Appleby (Cayman), provide an overview of the history and holding of the case, analysis of potential issues created by the ruling and practical advice for hedge fund managers and investors in light of the decision. For additional commentary from Appleby attorneys, see “Cayman Islands Decision Highlights Three Questions That May Affect the Enforceability of Fund Side Letters” (May 28, 2015); and “How May Investors in Cayman Islands Hedge Funds in Liquidation Protect Their Interests If Dissatisfied With the Liquidators’ Conduct of the Liquidation?” (Sep. 11, 2014). For coverage of another hedge fund forced to liquidate due to its investment in Madoff feeder funds, see “BVI Court Rules on the Validity of the Appointment of Hedge Fund Liquidators by a Hedge Fund Manager Subject to SEC and CFTC Enforcement Actions” (Mar. 28, 2013).