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Bear Stearns hedge fund losses lead to arbitration claims

Arbitration claims were filed this week with Financial Industry Regulatory Authority (FINRA).

The Bear Stearns hedge fund at issue in the FINRA claims is the Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage (Overseas) Fund.

Three weeks ago, Massachusetts Secretary of State William Galvin charged Bear Stearns with improper trading in the failed hedge fund as well as the Bear Stearns High-Grade Structured Credit Strategies hedge fund. In late July, both funds filed for bankruptcy protection in theSouthern District of New York, wiping out nearly all investor capital.

According to Ryan Bakhtiari, “Given Bear Stearns’ dominance in the mortgage backed securities underwriting market, they knew or should have known how much subprime exposure both of these hedge funds faced. We’re finding, in our investigation of these funds, that many investors in these funds simply were unaware of what was being held in their portfolios because it was not adequately disclosed.”