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

FINtech Focus: Fundbase Aims To Revolutionize Access To Hedge Funds

Jan 23 2015 | 11:03am ET

Global investment in financial technology—also known as fintech—is booming....

Lifestyle

Hedge Fund Billionaires Prepare Their Bunkers

Jan 27 2015 | 8:57am ET

If income equality ever leads to insurrection, the world's wealthiest hedge fund...

Guest Contributor

From Switzerland With Love: Some Hard Truths About Central Banks And Risk

Jan 23 2015 | 7:54am ET

In the wake of the Swiss National Bank uncoupling the country’s currency from...

 

Editor's Note