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16 Dec 2009

Hedge Funds Win London Lehman Case

Hedge funds controlled by Goldman Sachs and GLG Partners won a significant court ruling yesterday, over how to properly distribute billions of dollars of clients money held by Lehman Brothers when it collapsed, The Financial Times reported.

The High Court in London said that the Lehman funds were not “ring-fenced,” by the investment bank’s European arm and could not be claimed out of a $1 billion pool of funds currently controlled by Lehman administrators.

The Financial Times also said that while the ruling is a win for Goldman and GLG, whose cash was properly ring-fenced, it is a blow to several Lehman affiliates and other hedge fund clients, who now will not be eligible to pursue $3 billion worth of claims against the pool of funds.

The New York Times reported that roughly $11.4 billion in assets, including stocks, bonds, derivative contracts and other securities owned by hedge funds, insurance companies and other investors remain to be distributed in Lehman International’s trust account. Those funds have been frozen since Lehman collapsed in September 2008, frustrating some hedge funds that made trades through the firm before it fell into bankruptcy, the newspaper said.

Rajaratnam and Chiesi Indicted In Hedge Fund Fraud Case News Archives - Galleon hedge fund founder Raj Rajaratnam and Danielle Chiesi, an executive at New Castle Funds LLC were indicted Tuesday on multiple counts of conspiracy and securities fraud.

“Mr. Rajaratnam is innocent and looks forward to his day in court when a jury of his fellow citizens will examine and evaluate all of the evidence,” his lawyer, John Dowd, said.

The indictment includes 17 counts of conspiracy and securities fraud and seeks to recover $20.8 million. Among the stocks they traded illegally were those of Google Inc., Advanced Micro Devices Inc. and Intel Corp., according to the indictment.

“We intend to plead not guilty and defend the case and hopefully at the end prove the client’s innocence,” Chiesi’s lawyer, Alan Kaufman, said in an interview with Bloomberg. A court hearing is scheduled in Manhattan on Monday.