The battle to oust hedge fund manager Corey Ribotsky continues in face of a loss to view details of the fund’s PIPE investments and valuation methods. An important investor lawsuit was dismissed by a New York state appellate court last week, which placed a hard stop on existing court orders granted to NIR investor, Steven Mizel, to inspect NIR Group books. However, liquidators for NIR Group’s offshore investors convinced the Cayman Islands Grand Court that all investors in the fund have rights to vote who controls liquidation of the Master Fund because there is worry the NIR Group assigned liquidator, KPMG, won’t act in the best interest of fund investors.

On March 30th Ribotsky wrote investors he’d place the fund into a voluntary liquidation and assigned KPMG-Cayman Islands the liquidator for the Master and Onshore fund. A Cayman Island judge granted offshore investors PriceWatershouseCoopers an independent liquidator. Then on April 26th court documents filed in the Grand Court of the Cayman Islands show PWC filed to remove KPMG as the manager of the Master fund because they have a conflict of interest and cannot act as independent auditors. I reported for DealFlow Media this week, KPMG wrote to investors on April 28th they would remove themselves as managers if a vote of more than 50 percent warranted it but defended their independence.

The KPMG joint liquidators, Simon Whickerand Kris Beighton, did express they were seeking to have legal beneficial control over the assets portfolio, which would mean no transaction can be undertaken without their express authority. But because Ritbotsky created an interwoven ownership structure of master fund assets, that includes other NIR Group entities that are not the feeder funds, KPMG says it continues to push for allowing Ribotsky to manage the fund during liquidation and earn fees. Investors in the fund told me Ribotsky, who never completed a NYU law degree, appears to have masterminded a complex hedge fund structure for job preservation.

Onshore and Offshore investors have until May 6th to vote KPMG out as the manager. The court stated any NIR Group staff, or investors with a connection to funds management, are not allowed to vote. A letter to investors states the offshore fund controls 65% of the vote and the onshore investors have a 35% vote in the master fund. NIR Group has written in investor letters most of the total fund assets sit in the Master fund.

Tension between investors and the funds management is mounting because recent documents sent by the fund show that Ribotsky is the largest investor in the Master fund and thus controls the voting rights. Some investors think Ribotsky should not be allowed to earn fees during liquidation if he is also a large investor in the fund. One investor in the onshore fund wrote KPMG last week expressing Ribotsky should not be allowed to vote on who manages the fund during the liquidation because part of his total assets under management included the fees he made off investors and reinvested in the fund. Fees that Forbes first reported were at the heart of Mizel’s litigation which claimed they were earned through asset inflation and fraud. KPMG told investors in an April 28th letter a set of completed audited financial statements for the funds hasn’t been done since December 31st 2007.

The offshore investors have until May 23 to present any reply evidence and investor comments to the court. The final hearing is scheduled for May 27th in the Grand Court of the Cayman Islands.