The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Litigation: Isda and Fed back Bear Stearns

The International Swaps and Derivatives Association and a group of financial lawyers sponsored by the Federal Reserve (the Financial Markets Lawyers Group) have backed a Bear Stearns’ court appeal. In February this year, Bear Stearns was deemed liable for $125 million that fraudulent hedge fund the Manhattan Investment Fund, had deposited in the prime brokerage account it held at the investment bank before it filed for bankruptcy. The bankruptcy court concluded that Bear Stearns was liable for the deposits as their "initial transferee".

Isda and the Lawyers Group have submitted a brief to the district court in support of an appeal against the court judgement by the bank. The brief claims that "creditors were not harmed by the transfer of the money to the prime brokerage account, but rather by the fund’s unprofitable trading activities". The fund, the Manhattan Investment Fund, was established in 1996 and is said to have been running a strategy that involved the shorting of technology stocks. When the fund soon became unprofitable, its losses were covered up. Bear Stearns itself reported the fund to the SEC, which resulted in the investigation leading to the hedge fund’s closure.

The involvement of the two senior bodies indicates the extent of concerns in the industry about the ramifications should the court ruling not be overturned.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree