Crédit Agricole Sued Over CDOs Allegedly Built By Magnetar

Oct 26 2010 | 3:24am ET

Investors in a trio of collateralized debt obligations have filed a lawsuit against Crédit Agricole that reads an awful lot like the Securities and Exchange Commission's fraud case against Goldman Sachs.

The complaint was filed by the Loreley Companies, four Channel Islands investment companies set up by IKB Deutsche Industriebank to invest in asset-backed securities. According to the lawsuit, Crédit Agricole Corporate and Investment Bank allowed hedge fund Magnetar Capital to pick the subprime assets that made up the CDO, as Goldman was alleged to have allowed Paulson & Co. and hand in selecting the assets in its litigated CDO. And as with Paulson in the Goldman suit, Magnetar then shorted the CDOs, with the Loreley Companies none the wiser about its role.

Neither Paulson nor Magnetar have been charged with any wrongdoing in the cases.

IKB, the Loreley Companies' investment adviser, was one of the biggest losers in the Goldman Sachs CDO.

The four companies add that Crédit Agricole set up a third CDO on its own to dump "its unwanted, poor-quality assets" into before abandoning its CDO business "virtually overnight."

The lawsuit, filed in New York federal court, says the Loreley Companies invested US$70.5 million in the three CDOs. Crédit Agricole said the lawsuit was a "counter-action by IKB" in response to its own litigation against the German bank in the U.K. The French bank said the U.S. lawsuit was "without merit."

In Depth

The Importance of Stability in the Evolving Hedge Fund Administration Market

Oct 5 2015 | 8:17pm ET

Hedge fund administration has evolved from simple record keeping to an integral,...


Citadel's Griffin Reaches Settlement in Contentious Divorce

Oct 8 2015 | 10:14pm ET

Billionaire hedge fund manager Ken Griffin and his wife have settled a long-running...

Guest Contributor

Hedge Fund Marketing To Independent RIA Firms

Sep 30 2015 | 1:56pm ET

In this contributed article, Bruce Frumerman of Frumerman & Nemeth Inc. explains...


Editor's Note