German Bank Can Sue Hedge Fund Over CDO, Court Rules

Aug 9 2012 | 1:41pm ET

Aladdin Capital Management will have to defend its handling of a collapsed collateralized debt obligation, after all.

A federal appeals court in New York overturned a lower-court judge’s ruling throwing out the case against the hedge fund. The decision is a victory for Germany’s Bayerische Landesbank, which last year sued Aladdin, accusing it of misleading the bank about the mortgage-backed CDO and of recklessness in its management.

Bayerische Landesbank alleged that Aladdin had sold the CDO as investment-grade. But at least 11 underlying entities—among them Lehman Brothers, Washington Mutual and two Icelandic events—suffered credit events, and the bank’s entire US$60 million investment was lost.

But a lower court judge dismissed the case a year ago. Bayerische Landesbank appealed, and the Second Circuit Court of Appeals found that it had “plausibly alleged that Aladdin’s gross negligence exposed Bayerische to greater risk that it would lose its entire investment than would have otherwise been the case.”


In Depth

Q&A: Executive Recruiter Talks Hedge Fund Closures, Hiring Trends

Dec 19 2014 | 6:58am ET

This year, hedge funds have been closing at a rate not seen since the financial...

Lifestyle

Cooper-Hohn Won't Contest Divorce Settlement

Dec 18 2014 | 9:51am ET

The ex-wife of hedge fund billionaire Christopher Hohn will not contest a divorce...

Guest Contributor

Alternative Investment Funds Face A Communications Imperative

Dec 19 2014 | 6:10am ET

A handful of the top alternative investment firms on both sides of the Atlantic...

 

Sponsored Content

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

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

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.