WaMu Bankruptcy, Hedge Fund Insider-Trading Allegations Head To Mediation

Oct 7 2011 | 11:08am ET

A judge has ordered extensive mediation in the Washington Mutual bankruptcy before she'll consider another plan from the former bank.

U.S. Bankruptcy Judge Mary Walrath has twice rejected WaMu's bankruptcy plan, in part over allegations of insider-trading against four hedge funds involved in the crafting of that plan by WaMu shareholders. Walrath gave the sides until Nov. 7, and suggested the naming of a New Jersey federal bankruptcy court judge as mediator.

"I'm not going to have another contested confirmation without trying," Walrath said.

Walrath blocked the plan last month. She did not reject its main points, but ruled that the collapsed bank's shareholders had established a "colorable" case that the four hedge funds, known as the "settlement noteholders," had violated insider-trading laws during their involvement in WaMu's Chapter 11 plan negotiations. But, while ruling that the shareholders produced enough evidence that "the settlement noteholders knowingly traded with knowledge that the debtors were engaged in global settlement negotiations… of which the trading public was unaware" to sue the hedge funds, she blocked any immediate litigation, pending mediation.

All four hedge funds have denied any wrongdoing, and, despite Walrath's barring of it, a lawyer for Appaloosa said that the shareholders "should just bring their claims if they have them and we'll fight them." A lawyer for Aurelius told The Wall Street Journal that the firm is willing to mediate the insider-trading allegations—Walrath said that "all the issues have to be on the table"—but would only accept "very, very minimal damages."


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

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.