Ernst & Young won a decision involving a defunct hedge fund after its liquidators sued the firm's Cayman Islands unit, accusing it of performing a deficient audit and failing to detect the investment managers' fraudulent valuation.

In August 2002, Beacon Hill Master, a hedge fund established in the Cayman Islands in 1997, lost $300 million, about half its net asset value. The SEC charged the fund managers with inflating the value of their investment portfolio. They denied wrongdoing, but settled with the SEC for $4.4 million in 2005.

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