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.
Reuters – Hedge fund founder Ezra Merkin is being cooperative with New York state’s top legal officer in its investigation of three funds as part of the probe into accused swindler Bernard Madoff, officials said on Wednesday.
New York Attorney General Andrew Cuomo is seeking information from Merkin and his Gabriel Capital Corp, Ariel Fund Ltd and Ascot Partners funds, Cuomo’s office said last month.
All of the funds have been sued by nonprofits and individual investors who accuse them of investing with Madoff without their knowledge.
Boston Globe – A judge extended an order on Tuesday barring hedge fund founder Ezra Merkin from shutting down funds that had invested with accused swindler Bernard Madoff or withdrawing money from them.
New York State Supreme Court Justice Richard Lowe issued the extension in a lawsuit brought on December 23 by New York University, which says it lost $24 million when funds run by Merkin invested money with Madoff without its consent.
Another judge issued the initial order on December 24 to stop Merkin from liquidating Ariel Fund Ltd, named in the lawsuit by the university along with Merkin and his Gabriel Capital Corp.
New York Post – The developers of the famed landmark are fighting back following two multimillion-dollar lawsuits filed against them by separate penthouse buyers within the past two weeks.
Developer El-Ad Properties, which renovated the 101-year-old building to include pricey condos, is countersuing Russian hedge-fund manager Andrei Vavilov for damages totaling $36 million after he claimed he was the victim of a bait-and-switch.
Vavilov, 51, who bought adjoining duplex and triplex apartments for $53.5 million, filed a lawsuit against El-Ad and Stribling & Associates brokers for $30 million plus return of his $10.7 million deposit.
On Wednesday, the buyer of a duplex next to Vavilov’s two units – also said to be a hedge-fund manager – filed a similar suit, for $6.5 million.
In the countersuit filed in Manhattan Supreme Court, El-Ad accuses Vavilov of libel and filing a "sham lawsuit."
Financial Times – Abu Dhabi Commercial Bank has filed a lawsuit against two US banks and two rating agencies over losses from a collapsed $6bn structured investment vehicle, formerly managed by London-based hedge fund Cheyne Capital.
In the suit in a US court, the bank, which is majority owned by the largest of the United Arab Emirates, is seeking unspecified damages from Morgan Stanley, Bank of New York Mellon, Moody’s Investors Services and Standard & Poor’s.
The suit alleges investors were misled over the quality of assets held by the SIV, a vehicle that was part of an industry that was worth $400bn before it was decimated by the credit crunch. The crunch cut the value of asset-backed and other financial debt these vehicles invested in, while also causing their funding to evaporate.
Law.com – Smith, Gambrell & Russell and one of its former attorneys are caught up in the expensive brouhaha surrounding International Management Associates, a now-defunct investment firm which bilked pro football players, a former Scientific-Atlanta CEO and other well-heeled investors of some $150 million.
IMA’s bankruptcy trustee, William F. Perkins, told a federal court last month that the law firm and a former counsel from its Washington, D.C., office, C. Gladwyn Goins, represented IMA so poorly that they not only allowed the company’s founder, Kirk S. Wright, to embezzle from investors long after his wrongdoing could have been discovered but also "helped Wright to continue his criminal misconduct."
Those alleged legal missteps cost the company "tens of millions" of dollars, according to the complaint, which demands that the firm and its former counsel pay more than $80 million in damages, plus attorney fees and litigation costs.
Reuters – Wachovia Corp said on Monday it has had significant losses from a Citigroup hedge fund, joining Fifth Third Bancorp, which disclosed its loss in an April lawsuit.
Wachovia spokeswoman Christy Phillips-Brown said a $315 million write-down the bank disclosed earlier in May was related to investments in Citigroup’s Falcon Strategies hedge Fund. Wachovia, the fourth-largest U.S. bank, made the investments through its bank-owned life insurance portfolio.
Fifth Third said in a lawsuit filed on April 17 that it had invested $612 million in Falcon. The bank is looking to recover $323 million in damages from the two AEGON NV subsidiaries that had been managing its bank-owned life insurance portfolio.
Citigroup, Aegon and Fifth Third could not be immediately reached for comment.
An unidentified third bank also took a large loss in Falcon, the Wall Street Journal reported on Monday, citing sources familiar with the matter.
The Journal said the banks could ask Citigroup to give them some of their money back, because it has already agreed to do so for individual investors.
