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Friday, August 10, 2007

Bear Stearns Hedge Fund Update

Bankruptcy Judge Burton R. Lifland is scheduled to rule on August 27 where Bear Stearns’ two bankrupt hedge funds will be liquidated – in the Cayman Islands or New York.

Bear Stearns wants the funds liquidated in the Cayman Islands, where the funds were incorporated. But most of the assets of the funds are based in New York, so creditors may want the liquidation to take place in Lifland’s court.

Bear Stearns knows Judge Lifland quite well. The judge earlier this year ordered the firm to pay nearly $160 million to investors for failing to properly supervise Manhattan Investment Fund, one of the hedge funds it cleared trades for. Lifland also ruled that $121.1 million of transferred payments be returned to investors with interest. If Lifland decides to keep the case in his court, he could conceivably order Bear Stearns to return the millions of dollars in collateral it seized from its failed hedge funds before they collapsed.


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