Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Bear Stearns Investors Make Bank?

By

A secret settlement bails out Massachusetts hedge-fund holders.

PrintPRINT
In Massachusetts, it apparently pays big to be very, very wrong.

A select group of Massachusetts investors are recouping every penny they lost when 2 now-defunct Bear Stearns hedge funds collapsed in June 2007, the Daily Beast reports.

In November, William F. Galvin, secretary of state for Massachusetts, secured a $9.3 million confidential settlement with JPMorgan (JPM), whereby hedge-fund investors would receive 100 cents on the dollar of their original investment. Checks -- some for a cool $1 million -- were sent to these lucky few in December, just in time for Christmas.

One lawyer for JPMorgan was quoted as saying that Galvin "put a gun to our head" to secure the deal.

Predictably, the settlement has investors unlucky enough to live in other states up in arms, since many lost all or most of their original outlay. And even in Massachusetts, no payouts will be made to former Bear Stearns employees, regardless of how much money they lost. Some have darkly speculated that this is because the firm is eager to mend fences with those who might someday be clients - former employees be damned.

In the fall of 2007, Bear Stearns, hoping to avoid future litigation, made a number of preliminary settlements with investors. According to the terms of that deal, those who invested in the hedge funds in May or June 2007 would recoup their entire investment; those who invested between January and April 2007 would recoup two-thirds; and those who invested before January 2007 would recoup one-third.

Ralph Cioffi and Matthew Tannin -- the men who managed the funds in question from their launch in 2003 until their collapse in 2007 -- were indicted in June of last year on charges of conspiracy, wire fraud and securities fraud. (As early as mid-2006, Cioffi was barred from trading with Bear Stearns affiliates due to his repeated code violations.) The trial will begin in the Eastern District of New York later this year.

Why JPMorgan Chase agreed to the settlement -- and whether other states will follow Massachusetts in filing suit -- remains to be seen.
< Previous
  • 1
Next >
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE