Judge Lifts Payout Ban in Whitney Fund Battle

Feb 25 2015 | 6:37pm ET

New York State Supreme Court Judge Jeffrey Oing has lifted a temporarily ban put in place earlier this week that prevented Meredith Whitney’s American Revival Fund from making investor payouts while litigation between the fund and its largest investor continues.

Whitney is locked in a battle with BlueCrest Capital Opportunities, a fund affiliated with billionare Michael Platt, which seeded her American Revival Fund back in 2013. 

A lawsuit in New York State Court filed last week by BlueCrest claims American Revival refused to honor a redemption request last October. BlueCrest first filed suit in Bermuda, the fund’s domicile, last December with the same claim, but dropped that action in favor of the New York one. 

American Revival fell 11% in 2014 as the broader stock market indices rose. BlueCrest, one of the firm’s biggest backers, asked for its capital back after several consecutive months in the red. The stake, once worth $50 million, had dwindled to $46 million at the time of BlueCrest’s redemption request, according to court filings. 

Yet those filings also show the agreements governing the investment are confusing. On the one hand, they explicitly state BlueCrest can’t redeem its capital until the two-year anniversary of its investment, which works out to November 2015. On the other, they also state that BlueCrest will not be subject to any gates, locks or other redemption holdbacks imposed by the fund. 

Oing lifted the payment ban following a hearing in Manhattan on Wednesday afternoon. At the same time, he also denied BlueCrest’s request to have American Revival honor the redemption pending resolution of the litigation, saying he was “not quite convinced” a redemption right exists at the moment. 

Meredith Whitney became a household name in financial circles for her extremely clairvoyant 2007 call when, just months before the onset of the financial crisis, she warned the bank would have to cut its dividend.

At the time, Whitney was one of only a handful of Wall Street professionals openly questioning the health of the U.S. financial system – and its constituents – before the wheels came off. 

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