Hedge Funds, WaMu Shareholders Settle Insider-Trading Allegations

May 26 2011 | 10:51am ET

Four hedge funds have settled insider-trading allegations against them in the Washington Mutual bankruptcy, moving the former bank a step closer to getting out of bankruptcy protection.

WaMu's shareholders have settled their grievances with the hedge fund creditors, who have agreed to accept $160 million in debt and preferred equity in the reorganized company, instead of common stock. In addition, the "significant creditors" have also agreed to lend the firm, which sold its banking operations to JPMorgan Chase in 2008, as much as $100 million.

In exchange for dropping their insider-trading probe, WaMu's shareholders will get common stock in the reorganized company and a litigation trust that will sue to raise money.

WaMu did not identify the "significant creditors," but published reports indicate that they include four hedge funds—Appaloosa Management, Aurelius Capital Management, Centerbridge Capital Partners and Owl Creek Asset Management—which initially backed WaMu's Chapter 11 bankruptcy plan but refused to renew their support earlier this year. Some shareholders had alleged that the hedge funds used confidential information they learned during the creation of WaMu's reorganization plan.


In Depth

Humble in Hofstra...One Debate an Election Can Make

Sep 26 2016 | 10:20am ET

Tonight's U.S. Presidential debate, infamously coined the “Humbling in Hofstra...

Lifestyle

Vortic: Reimagining the Custom Wristwatch

Sep 27 2016 | 7:24pm ET

American watch manufacturer Vortic, which started out restoring antique pocket watch...

Guest Contributor

Malik: The Ever-Changing Middle Market and The Entering Class of 2016

Sep 2 2016 | 5:01pm ET

Deal sourcing and origination is only going to get more competitive given current...