Saturday, 28 May 2016
Last updated 1 day ago
Oct 2 2009 | 2:34am ET
A federal judge has refused to dismiss a lawsuit filed against Bear Stearns and the managers of two collapsed hedge funds filed by Bank of America.
BofA accuses Bear and the managers of two of its hedge funds—both of whom are facing criminal fraud charges—of lying to it about the state of the hedge funds, whose assets were used to back securities structured by BofA. Federal prosecutors also allege that Cioffi and Tannin misled investors in the funds, which collapsed two years ago at the onset of the credit crisis. The failure of the High-Grade Structured Credit Fund and a more highly-levered sister fund cost investors $1.6 billion and helped lead to Bear’s own collapse the following year. Bear is now owned by JPMorgan Chase.
U.S. District Judge Kevin Castel refused a bid to dismiss the contract and fraud claims against Bear and the hedge fund managers. BofA says Bear, Cioffi and Tannin hid the hedge funds’ losses, which led to an “enormous decline” in the value of the assets backing the securities.
BofA is seeking more than $2 billion.