The Independent- Barclays has launched a $400m-plus legal action against Bear Stearns, accusing its Wall Street rival of fraud over the collapse of two hedge funds earlier this year.
The collapse of the funds in June was the first sign of the seriousness of the mortgage market crisis, but Barclays alleges that Bear Stearns was misrepresenting the health of its hedge fund business for more than nine months leading up to the disaster.
Barclays’ possible losses on the funds, to which it advanced a string of multimillion-dollar loans, could amount to between $300m and $400m, and the company demanded compensation and damages in a lawsuit filed with a New York court last night.
The action adds to the legal problems swirling around Bear Stearns and the managers in charge of the two funds, whose collapse wiped out $20bn almost overnight. Last month, the US attorney in Massachusetts charged the company with improper trading activity, and it was reported earlier this week that Ralph Cioffi, the fund manager, was under investigation for moving $2m of his personal fortune out of one of the funds just a few weeks before its collapse.
