Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, May 23, 2007

Hedge Fund Investors Charge UBS With Harm to Fund

Investors in failed hedge fund Wood River are suing prime broker UBS, saying it used confidential information about the fund's portfolio to make money for itself at the expense of the fund.  Wood River owned an undisclosed large block of stock in Endwave, which violated both section 13(d) and its own publicly-stated policy against concentrating more than 10% of its portfolio in one stock.  The complaint charges that UBS knew management was violating the rules, but instead of taking steps to cure the problem, it used the Endwave shares to assist short sellers in the stock and made $100 million in profits.  The founder of the hedge fund, John Whittier, is charged with criminal fraud for the fund's violations of its investment policies.  See WSJ, Lawsuit Against UBS Spotlights Prime Brokers.

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