Fairfax Says Loeb 'Lied' To Third Point Investors

Mar 8 2011 | 12:43pm ET

A financial services company is accusing Third Point founder Daniel Loeb of lying to investors about the firm's research into the Canadian insurer.

Fairfax Financial Holdings' allegation is the latest in a nasty five-year legal battle between the company and a group of hedge funds, including SAC Capital Advisors and Kynikos Associates. Fairfax is seeking some US$6 billion in damages from those firms, alleging that they engaged in insider-trading and conspired to drive Fairfax's stock price down.

According to Fairfax's latest accusation, Loeb told investors in a letter that "the decision to short Fairfax-related positions was one of the "most thoroughly-research investments in the firm's history." But, the insurer alleges, "Loeb could not identify any such research."

"Third Point has never produced any such internal research, and Loeb was forced to admit in his deposition that he did not know what finite reinsurance was, despite the fact that he cited this as one of the bases for believing Fairfax was a fraud."

"One can also only conclude that Loeb lied to his investors—including his New Jersey investors—in order to cover up the illegal conduct in which he participated."

Fairfax's lawsuit is pending in New Jersey state court.

"This frivolous litigation was an obvious attempt to deflect attention from the company's own financial shortcomings," Third Point said.

"Third Point's research regarding Fairfax was borne out when the company was forced to restate its financial statements, erasing over $235 million of shareholder equity just one day after this lawsuit was launched in 2006."

In 2009, Fairfax offered e-mail evidence that SAC and Kynikos received advanced word that an analyst at Morgan Keegan was going to issue a negative research report about Fairfax.


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.