Bear hid dire state of funds, say investors

Investors in Bear Stearns' two collapsed hedge funds have filed arbitration claims against firm, according to Reuters.

Investors in The Bear Stearns Cos.’ two collapsed hedge funds have filed arbitration claims against firm, according to Reuters.
The up-to-11 claims are filed with the Financial Industry Regulatory Authority, the Washington and New York-based non-governmental regulator.
Altogether, the 11 investors share a combined $62 million in losses.
They were involved in the Bear Stearns High Grade Structured Credit Strategies and Enhanced Leverage funds, which tanked at the end of July and burned up $1.6 billion in investments.
Attorneys for the investors said that the firm kept selling the funds’ shares this spring as the subprime mortgage market imploded, Reuters reported.
One claim involves a Cayman Islands fund-of-hedge funds manager who lost $1 million in the Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage (Overseas) Fund, Reuters said.
“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 Steve Caruso, a lawyer at Maddox Hargett and Caruso in New York, to Reuters.
His firm is one of the four representing the fund-of-funds manager.
In August, a Wisconsin-based investor claiming to have lost $500,000 in the High Grade Structured Credit Fund filed the first investor arbitration claim, while Navigator Capital Partners filed a civil lawsuit against the firm in the Supreme Court in New York.