WASHINGTON, USA (Bloomberg): Bear Stearns Cos. clients hit with about $62 million in losses tied to the June collapse of two Cayman Islands hedge funds began filing claims this week, accusing the bank of deception and other misconduct, plaintiffs’ lawyers said.
At least 11 institutional and retail investors will file arbitration cases with the Financial Industry Regulatory Authority, said Steven Caruso, one of a group of attorneys handling the claims. One was filed this week by a Cayman Islands investment manager seeking $1 million in damages, according to a copy of the complaint, which didn’t identify the plaintiff.
“Officials at Bear Stearns engaged in a concerted effort to conceal the true state of affairs at both of these hedge funds for an extended period of time before they imploded,” said Caruso, a partner at Maddox Hargett & Caruso PC in New York. Client losses ranged from $1 million to $8 million.
Bear Stearns, the fifth-largest US securities firm by market value, sought bankruptcy protection for two hedge funds in July after rising defaults on subprime mortgages led to losses. The funds’ collapse triggered regulatory probes and investor lawsuits. Arbitrators at Washington-based Finra hear cases brought by investors against their brokerages.
The claims announced on Wednesday target two Bear Stearns divisions on behalf of people who suffered losses in the Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage (Overseas) Fund. As a so-called feeder fund, it had invested in the two hedge funds that collapsed.
Russell Sherman, a spokesman for New York-based Bear Stearns, said he couldn’t comment on the case because he hadn’t seen the claims.
Cases are being brought by four law firms. The others are Aidikoff, Uhl & Bakhtiari in Beverly Hills, California; Page Perry LLC in Atlanta; and David P. Meyer & Associates Co. in Columbus, Ohio.