West Palm Beach (HedgeCo.Net) – April 3rd will mark a big day for investors of hedge funds if a judge chooses to proceed with an involuntary bankrupt suit in what ultimately could require Ritchie Capital to unveil their balance sheets.
The Chicago based hedge fund asked Judge Sonderby to dismiss the suit, brought on by Benchmark Plus Partners and Sterling Low Volatility Fund last year.
Ritchie is not only seeking to dismiss the petition, but is asking $5 million from the two investors to “indemnify the costs, expenses and damages that the Fund has incurred and will incur as a result of the improperly filed bankruptcy petition.”
Under current law, an involuntary petition may only be filed by creditors of the fund, which Benchmark and Sterling are not. If the judge grants the investors access to this information, a precedent will be set, blowing the door open for investors of all funds to request or even demand information on hedge fund’s normally hush-hush endeavors.
Ritchie has affirmed their deliverance of transparency, above and beyond what is normally required by investors. In a recent press release, the company stated that they even hired a third party investigator to review the fund, at a cost of a half million dollars to them.
“The fund is fully and timely meeting all of its financial obligations,” said a spokesman for Ritchie. “Additionally, we have always acted in good faith and have gone above and beyond the normal standards for hedge funds in providing financial information to our investors.”
Benchmark and Sterling are looking for explanations and any red flags that may have preceded April 2007, when Ritchie sold most of the fund’s assets for $285 million. If they are granted access to the record books, they will be able to view investor strategies, trading secrets, and other private information. The investors are hoping to prove that Ritchie put their own internal needs ahead of their clients.
Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net
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