Judge Rules Against Sofaer In Wireless Lawsuit

Jun 15 2011 | 2:28am ET

Sofaer Capital is going to have to make due without the $10 million it lent to a Hong Kong-based wireless communications company four years ago.

A federal judge in Indianapolis dismissed the London-based hedge fund's 2009 lawsuit against mobile phone company Brightpoint, alleging that the company defrauded Sofaer into making the loan to Chinatron Group Holdings. According to Sofaer, Brightpoint CEO Bob Laikin was a founding shareholder of Chinatron, which was in danger of defaulting on its loan from Brightpoint.

"If Chinatron could not repay its debt to Brightpoint by the end of 2007, Brightpoint would be forced to record it as 'bad debt' on its books, which would be subject to scrutiny by Brightpoint's audit committee, a situation Laikin very much wanted to avoid," the hedge fund alleged in its lawsuit.

Sofaer came to the rescue, lending Chinatron $10 million—which it used to repay Brightpoint—on the expectation it would get a $12 million repayment a few months later, after Chinatron sold its Mobiltron France subsidiary to Brightpoint.

But the deal never happened, even though Sofaer alleged that Laikin called the Mobiltron transaction "as good as a done deal."

That claim wasn't good enough for U.S. District Judge Tanya Walton Pratt, who wrote, "Sofaer simply had to understand that there was some risk that the deal would fall apart. Apparently, though, Sofaer was blinded by rose-colored glasses, believing that a deal in its infancy was actually carved in stone."


In Depth

JOBS Act Propels Real-Estate Crowdfunding Platform

Oct 21 2014 | 2:57am ET

If D.J. Paul were a real estate development, he would be described as “multi-use...

Lifestyle

Balyasny Pays Over $6M For Lakefront House

Oct 22 2014 | 10:29am ET

A venture headed by hedge fund manager Dmitry Balyasny just paid $6.2 million for...

Guest Contributor

Hedge Funds Weather A Data Management Perfect Storm

Oct 22 2014 | 12:28pm ET

From a regulatory standpoint, nearly every development since the crisis has placed...

 

Videos

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

October 2014 Cover

Deeply flawed risk benchmark

Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...

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.