UBS Drops Battle In CDO Case As Trial Looms

Mar 14 2011 | 12:28pm ET

UBS has resigned itself to keeping more than $35 million in the bank as it prepares for a December trial over a hedge fund's claims that that bank sold it "vomit" and "crap."

The Swiss bank last month withdrew its appeal of a Connecticut state court order forcing it to put $35.6 million aside to cover a potential verdict against it in a lawsuit brought by hedge fund Pursuit Partners. According to Pursuit, UBS sold it a collateralized debt obligation despite its own concerns that ratings agencies were poised to downgrade the then-investment grade securities. The Moody's Investor Services and Standard & Poor's did just that, causing Pursuit to lose its entire $40.5 million investment.

In September 2009, Judge John Blawie ruled that, in light of internal e-mails at UBS, one calling the CDOs "vomit" and another bragging about selling "more crap to Pursuit," the hedge fund "presented sufficient evidence to satisfy the probably cause standard with respect to their claim that UBS was in possession of superior knowledge."

UBS appealed that ruling, but did not say why it had chosen to give up that fight. The lawsuit is set to go to trial in December—the first time, according to Pursuit's attorneys, that a hedge fund claim over CDO losses will go to trial.


In Depth

Will Liquid Alts’ Performance Sustain Future Asset Flows?

Aug 25 2014 | 10:34am ET

Liquid alternative investment funds saw the highest percentage of capital inflows...

Lifestyle

Hedgies, Economists and Musicians Mingle At Milkin Mixers In Hamptons

Aug 25 2014 | 6:00am ET

Leave it to Michael Milken to bring some gravitas and sweat to the Hamptons -- along...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

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

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

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.