Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Bloomberg – HSBC Holdings Plc, Europe’s largest bank, is facing lawsuits in Ireland by investors faulting the lender for how it performed as custodian for money lost in Bernard Madoff’s $65 billion Ponzi scheme.
A Dublin court may rule tomorrow on whether investors must wait to pursue claims against HSBC until suits by mutual funds that used the bank as a custodian are resolved. Two Irish funds suspended redemptions due to exposure to Madoff.
Custodian banks, especially those serving European Union- regulated funds that are typically low risk, face scrutiny as the European Commission seeks to increase their responsibilities after the Madoff scandal. Investors in Luxembourg and Ireland, Europe’s biggest and third-largest mutual fund markets, have sued custodians, asking courts to break legal ground by ordering them to repay billions of dollars lost in Madoff’s fraud.
Caribbean Net News – The trustee liquidating Bernard Madoff’s business told a judge that two Cayman Islands and Bermuda hedge-fund firms accused of profiting from the fraud are ignoring his lawsuits seeking a total of $230.7 million in damages.
Trustee Irving Picard on Wednesday asked the US Bankruptcy Court in Manhattan to file default notices against the Cayman Islands-based Primeo Fund and Bermuda-based Alpha Prime Fund Ltd., court papers show. Two offshore firms sued earlier for a total of $1.2 billion also have ignored Picard’s lawsuits.
Los Angeles Times – Derek Anderson and Victor Kubicek, producers of Warner Bros.’ and Sony Pictures’ May release ”Terminator Salvation,” have filed a pair of $30-million lawsuits: One against Santa Barbara hedge fund Pacificor, which lent them money to buy the rights to the science-fiction film series, and another against a former employee of Pacificor who helped arrange the loans.
The suits come as Halcyon Co., which is owned by Anderson and Kubicek, has been attempting to raise money to continue operating, according to several people familiar with the situation. The duo also are developing a fifth ”Terminator” film, two sources said.
If they don’t prevail in the suit or raise enough money to pay back Pacificor, however, they may not get the chance to make another movie. According to the complaints, the hedge fund may end up taking control of the ”Terminator” rights, which served as collateral for its loans.
Boston Globe – It’s been a bad few months for New York financier J. Ezra Merkin. First, his hedge funds lost $2.4 billion in the Bernard Madoff swindle. Then, he lost his post as chairman of GMAC Financial Services.
Now, he’s parting with his prized art collection.
Bombarded by lawsuits accusing him of fraud, Merkin and his wife have arranged to sell their impressive collection of paintings by abstract expressionist Mark Rothko, as well as some valuable sculptures by Alberto Giacometti, according to legal papers filed yesterday.
An anonymous buyer has agreed to pay $310 million for the trove, the filing said.
Sarasota Herald-Tribune – Richard W. Fields says he has come up with a win-win financial strategy for the downturn. He is investing in lawsuits.
Not in trip-and-fall cases, mind you, but in disputes that are far larger, more costly and potentially more lucrative, often pitting major corporations against each other.
Mr. Fields is chief executive of Juridica Capital Management. which runs a fund that invests in one side of a lawsuit in exchange for a share of any winnings.
Bloomberg – The cost of insuring hedge funds against negligence has risen as much as 20 percent in the past six months after Lehman Brothers Holdings Inc.’s bankruptcy and Bernard Madoff’s Ponzi scheme increased the threat of lawsuits.
A fund manager with $200 million of assets running a “straightforward” strategy is typically paying as much as $60,000 a year for $5 million of coverage, up from $50,000 at the end 2008, said Brian Horwell, director of professional risks at London-based Miller Insurance Services Ltd.
“We’ve had Lehman Brothers, Madoff and the financial downturn, all of which are hitting claims,” said Paul Towler, head of financial and professional insurance at Jardine Lloyd Thompson Group Plc in London. “There’s a lot of worry and concern about what other claims are still to come out.”
Boston Globe – Investors of disgraced financier Bernard Madoff have filed 18 lawsuits against Massachusetts Mutual Life Insurance Co. in an effort to recoup $3.3 billion that its hedge fund group lost in the scandal. But the Springfield insurer is trying to distance itself from the ordeal and says it has no liability in the matter.
MassMutual maintains that the losses racked up by investors in its hedge fund group, Tremont Group Holdings Inc., are their own – and not the responsibility of the insurance company. Tremont had the second-largest loss among Madoff clients after Fairfield Greenwich Advisors, a New York hedge fund that lost $7.5 billion.
New York Post – The founders of a New York hedge fund at the center of the Bernard Madoff scandal have begun selling assets as their firm faces massive losses and a slew of lawsuits, sources told The Post.
Walter Noel and Jeffrey Tucker, co-founders of Fairfield Greenwich Group, a New York hedge fund that lost a whopping $7.5 billion to Madoff’s alleged Ponzi scheme, have been forced to curb their lavish lifestyles amid mounting doubts that the firm can survive the firestorm.
The pair recently dumped a shared interest in a Cessna 560XL private jet, according to a person close to the firm.
Caymen Net News – Insolvency lawyers in Scotland should take an interest in a bankruptcy case in the Cayman Islands involving two Bear Stearns hedge funds and an American judge with the wonderful name of Burton Lifland.
The issue is this: where did a business that has gone bust have its main commercial interests?
The two funds were involved in what is now a familiar story amid the carnage on the world financial markets. They bet heavily on sub-prime mortgages and, as defaults increased, creditors demanded their money back leaving the funds with no cash.
