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. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Hedge funds: Investors sue Bear Stearns over losses

A case has been filed by investors in Bear Stearns’ two hedge funds that collapsed because of sub-prime losses. The case, filed in August, claims that the bank misrepresented the extent of the sub-prime exposure in the funds.

Securities arbitration lawyer Jake Zamansky, at law firm Zamanksy and Associates, which is leading the case, alleges that investors were told that 7% of the fund was invested in sub-prime. However, there are indications that the proportion was more than 50%. The complaint also alleges that Bear Stearns misrepresented the risk controls in place.

"The funds were pitched as conservative investments," says Zamansky. "Investors were told that the funds were 90% triple-A and double-A rated, and that downside losses could only reach 10%, not zero. Had they known the extent of the risk involved, they would not have invested." Finally, the complaint alleges that Bear Stearns misrepresented the deteriorating performance of the funds on conference calls to investors to prevent "a run on the bank".

Zamansky is representing institutional investors, funds of hedge funds and high-net-worth investors in the case. "At present there are more than two dozen investors from the UK, Europe and the US that we are representing," he says. "But there were several hundred investors in the fund, and I expect there to be other cases." Investors are seeking losses returned, and punitive damages of $100 million plus attorneys’ fees.

The first case in arbitration has been filed before the Financial Regulatory Authority (Finra), and the law firm has asked for documents and emails between Bear Stearns and the ratings agencies in order to prove the case.

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.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

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

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, 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

LOGIN NOW

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