Tuesday, 31 May 2016
Last updated 13 min ago
Jun 21 2010 | 12:52pm ET
Hedge fund SRM Global has lost its bid to recoup the crippling losses it suffered investing in subprime mortgage lender Countrywide Financial Corp.
A federal judge in Manhattan dismissed the British hedge fund’s lawsuit against Countrywide and Bank of America, which bought Countrywide in 2008. SRM had argued that Countrywide and three of its former executives had misled investors about its financial condition, which left SRM with a 90% loss on its huge Countrywide stake when the lender nearly collapsed.
In its lawsuit, SRM alleged that Countrywide in 2006 “knew they were ‘flying blind’ with respect to the value of substantial pay-option adjustable rate mortgage portfolio and thus… had no reasonable basis for assurances about Countrywide’s financial condition.” The hedge fund said that it took Countrywide nearly a year to disclose to investors that it had ceased to be viable and was no longer liquid.
But U.S. District Judge Richard Berman ruled that SRM “failed to plead facts showing a primary violation of the securities law” or that Countrywide “made a material misstatement or omission.”
Former BofA CEO Kenneth Lewis was also named in the lawsuit.