Investor In Collapsed Bear Hedge Fund Wins Arbitration Case

Feb 10 2010 | 12:58pm ET

An investor in a collapsed Bear Stearns hedge fund has won its arbitration case, despite the fact that the fund’s managers were acquitted of fraud charges in November.

Racetrac Petroleum, an Atlanta-based chain of gas stations, was award $3.4 million by the Financial Industry Regulatory Authority panel. The arbitration award, which was handed down on Dec. 23, accounts for 70% of Racetrac’s investment in the Bear fund, which collapsed in 2007, costing investors $1.6 billion.

The FINRA panel did not explain its reasoning for siding with Racetrac. It held 32 hearings last year on the matter, including six that occurred after the fund’s managers, Ralph Cioffi and Matthew Tannin, were acquitted.

That acquittal led many to believe that JPMorgan Chase, which acquired Bear Stearns in 2008, would escape any liability stemming from the funds’ failures, among the first of the credit crisis in the summer of 2007. When the JPMorgan bought Bear, it set aside $6 billion to cover any Bear litigation liabilities.

JPMorgan is responsible for paying the arbitrage award.

Racetrac’s was one of the few lawsuits and arbitration proceedings that went ahead following the acquittal of Cioffi and Tannin. Federal prosecutors had sought to stay the arbitration, but a federal judge rejected that bid.

Cioffi and Tannin had been accused of lying to investors about the health of the two highly-levered mortgage hedge funds they managed. The Securities and Exchange Commission is still pursuing its civil case against the two men.


In Depth

FINtech Focus: Fundbase Aims To Revolutionize Access To Hedge Funds

Jan 23 2015 | 11:03am ET

Global investment in financial technology—also known as fintech—is booming....

Lifestyle

Ex-Hedge Fund Billionaire Won’t Run For Senate

Jan 23 2015 | 5:48am ET

Ex-hedge fund manager Tom Steyer will not run for Senate after Sen. Barbara Boxer...

Guest Contributor

From Switzerland With Love: Some Hard Truths About Central Banks And Risk

Jan 23 2015 | 7:54am ET

In the wake of the Swiss National Bank uncoupling the country’s currency from...

 

Editor's Note