Judge Junks Fraud Charge Against Man In Magnetar Case

Oct 28 2011 | 12:12pm ET

A federal judge has dismissed fraud charges against the only individual charged in the Securities and Exchange Commission's lawsuit over a collateralized debt obligation linked to hedge fund Magnetar Capital.

U.S. District Judge Miriam Goldman Cederbaum tossed an allegation that Edward Steffelin engaged in fraud or deceit in constructing the $1.1 billion Squared CDO 2007-1. The SEC had alleged that Steffelin, who worked at the firm, GSC Group, that selected the securities that went into the CDO, failed to disclose Magnetar's role in picking those securities and that Magnetar was betting against the subprime mortgages that went into the CDO.

But Cederbaum ruled that Steffelin has no "duty to the investors" in the CDO, which was sold by JPMorgan Chase. The judge, however, refused to dismiss the SEC's other allegations against Steffelin, including that he sought to hide the CDO's risks.

According to the SEC, Steffelin was trying to land a job at Magnetar at the time the Squared CDO was put together.

Magnetar has not been accused of any wrongdoing in the Squared case, and has denied doing anything untoward.


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.