Hedge Fund Ordered To Pay $2.1M In Swaps Case

Oct 3 2011 | 12:40pm ET

A hedge fund must pay Wells Fargo & Co. more than $2 million to end a three-year-long dispute with the bank over a credit default swap.

Vanquish Capital Group's VCG Special Opportunities Master Fund is on the hook for the $1.02 million in collateral sought by Wachovia Corp., which has since been acquired by Wells Fargo, U.S. District Judge Laura Swain ruled. In total, she ordered the hedge fund to pay $2.1 million, including legal fees that actually exceeded the $1.02 million Wells Fargo claimed to be owed and interest.

VCG had claimed that Wachovia demanded higher-than-normal margin payments on a 2007 CDS—what began as $750,000 in collateral for a $10 million swap on a collateralized debt obligation rose to more than $10 million within several months. VCG sued Wachovia when it demanded a final $550,000 payment that would have pushed VCG's collateral in excess of the face value of the swap.

But Swain last year dismissed VCG's lawsuit and said it would have to pay Wachovia. Swain found that VCG's deal with Wachovia allowed it to demand collateral of $10.75 million—the original $750,000 plus the face value of the swap. VCG offered no evidence to counter that valuation, Swain ruled.

It is unclear if VCG plans to appeal the ruling. The Florida hedge fund has had little luck in the courtroom, last year also losing a claim that Citigroup "suckered" it into losing more than $18 million on the same CDS in the Wachovia case.


In Depth

'Smart Beta' Funds In Regulators' Sights, Hedgies May Be Next

Mar 26 2015 | 11:11am ET

Funds that mimic strategies used by active managers for a fraction of the cost could...

Lifestyle

Study: Both Marriage and Divorce Lead to Negative Hedge Fund Performance

Mar 25 2015 | 6:51pm ET

Trouble at home leads to trouble in the market for fund managers, according to researchers...

Guest Contributor

The Life Settlement: Yield For The Investor And Cash For The Consumer

Mar 31 2015 | 6:48am ET

Investors are languishing in a yield-starved, low-interest rate environment, looking...

 

Sponsored Content

    Mar 9 2015 | 6:35am ET

    Kelly RodriquesKelly RodriquesAs more investors look to diversify, many are beginning to use retirement funds to invest in alternative assets such as private equity and real estate. Kelly Rodriques, CEO & President of PENSCO Trust Company, explains how companies can connect with those looking to use their retirement accounts in a different way. Read more…

Editor's Note