Friday, 25 July 2014
Last updated 7 min ago
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.
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…