Wednesday, 23 July 2014
Last updated 2 hours ago
Aug 2 2010 | 1:13pm ET
Not content with suing NIR Group alone, two of the embattled hedge fund’s investors have sued each other.
Hull Capital Management and Highmount Olympic Fund, a pair of hedge funds themselves, are battling over the size of Highmount’s investment in Hull’s PIPE Equity Partners. Last January, Highmount traded its investment in an NIR fund, AJW Qualified Partners II, to PIPE Equity in exchange for a stake in that fund of PIPE funds. At the time, Highmount’s investment was valued at $4.6 million.
In its lawsuit, Hull claims that that value was merely provisional as investors waited on the AJW fund’s 2008 annual audit. That audit never came—thanks to what Hull, in its lawsuit against NIR, calls “AJW’s fraud and misrepresentations”—and the $4.6 million value of Highmount’s AJW stake was “substantially overstated.” Hull has written down PIPE Equity’s investment in AJW to just 30% of its last stated net asset value.
In its countersuit, Highmount accuses Hull of “buyers’ remorse” and claims that its agreement with Hull doesn’t allow the firm to adjust the value of its investment without the missing audit, and “imposes no deadline by which AJW’s annual audit will be issued.”
Highmount wants a court to affirm its stake in PIPE Equity and award it $5 million for breach of contract. Hull wants the court to toss its agreement with Highmount or allow it to cut its stake.
Federal authorities are currently investigating whether NIR or founder Corey Ribotsky misled investors or paid kickbacks to people in exchange for helping it inflate the value of some of its hedge funds. Neither NIR nor Ribotsky has been accused of any wrongdoing, but a former NIR analyst last month pleaded guilty to taking kickbacks and fraud, and investors have accused NIR of essentially making up its returns.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…