Rebel investors have seized control of two failed Bear Stearns hedge funds which would possibly give them a platform to sue the US bank for compensation. A Cayman Islands court ejected the liquidators appointed by Bear Stearns to run the offshore feeder versions of Bear Stearns High-Grade Structured Credit and Enhanced Leverage funds and replaced them with investor-supported liquidators.
The judge hearing the case said there was a possible conflict as KPMG, which he said was chosen as liquidator by the fund directors at the “instigation” of Bear Stears, was also liquidator of the master fund into which the feeders invested. He said there was no blame attached to KPMG.
The seizure lays the ground for the investors to try to win back some of the $1.6 billion lost in the collapse of its onshore and offshore Bear funds last July, when they became the first high-profile victims of the sub-prime crisis.
This seizure is particularly important because hedge fund investors are usually unwilling to have their names made public through a court hearing for fear of ridicule over losses. By using the feeder funds the case can be made without their names being needed.
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