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- Jan 25, 2010
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The structured deposit issue comes back to life. The wealthy investors of the Pinacle Notes obviously do not have much confidence in the Singapore courts. They have therefore opted to sue in the US rather than Sg. An interesting case to watch, especially if the US courts rule in favour of Pinacle Notes investors.
Morgan Stanley sued over alleged CDO fraud
http://www.reuters.com/article/idUSTRE69O5BO20101025
(Reuters) - Morgan Stanley was sued by a group of Singapore investors that accused it of rigging a bond sale related to collateralized debt obligations in order to wipe out their $154.7 million investment.
In a complaint filed in Manhattan federal court, the 18 investors said they invested in notes issued by Pinnacle Performance Ltd, a Cayman Islands-registered entity, that Morgan Stanley had marketed as "conservative," with an eye to protecting the investors' principal.
But they said Morgan Stanley instead invested their funds into synthetic CDOs of their own making, where the bank itself was counterparty on underlying swap agreements. The investors said this arrangement was structured to let Morgan Stanley gain one dollar for each dollar they lost.
"Morgan Stanley designed the synthetic CDOs to fail," the 119-page complaint said.
"It placed itself on the side guaranteed to win (the "short" side) and placed plaintiffs and the class on the side guaranteed to lose (the "long" side)," it went on. "(It) boils down to a classic bait-and-switch scheme."
Morgan Stanley spokesman Mark Lake declined to comment.
The lawsuit is the latest challenging banks' creation and marketing of CDOs, following the U.S. Securities and Exchange Commission's lawsuit in April accusing Goldman Sachs Group Inc of structuring a CDO known as Abacus to benefit hedge fund investor John Paulson at the expense of other investors.
Goldman in July agreed to pay $550 million to settle that lawsuit, without admitting wrongdoing.
On Friday, a separate group of investors sued Credit Agricole SA in a New York state court. They accused the French bank of allowing a hedge fund to select poor assets to back two CDOs in which they invested, and did not disclose that the hedge fund was taking short positions.
The Morgan Stanley lawsuit seeks class-action status, actual and punitive damages, and other remedies.
The case is Dandong et al v. Pinnacle Performance Ltd et al, U.S. District Court, Southern District of New York, No. 10-08086.
(Reporting by Jonathan Stempel in New York; Editing by Phil Berlowitz)
Morgan Stanley sued over alleged CDO fraud
http://www.reuters.com/article/idUSTRE69O5BO20101025
(Reuters) - Morgan Stanley was sued by a group of Singapore investors that accused it of rigging a bond sale related to collateralized debt obligations in order to wipe out their $154.7 million investment.
In a complaint filed in Manhattan federal court, the 18 investors said they invested in notes issued by Pinnacle Performance Ltd, a Cayman Islands-registered entity, that Morgan Stanley had marketed as "conservative," with an eye to protecting the investors' principal.
But they said Morgan Stanley instead invested their funds into synthetic CDOs of their own making, where the bank itself was counterparty on underlying swap agreements. The investors said this arrangement was structured to let Morgan Stanley gain one dollar for each dollar they lost.
"Morgan Stanley designed the synthetic CDOs to fail," the 119-page complaint said.
"It placed itself on the side guaranteed to win (the "short" side) and placed plaintiffs and the class on the side guaranteed to lose (the "long" side)," it went on. "(It) boils down to a classic bait-and-switch scheme."
Morgan Stanley spokesman Mark Lake declined to comment.
The lawsuit is the latest challenging banks' creation and marketing of CDOs, following the U.S. Securities and Exchange Commission's lawsuit in April accusing Goldman Sachs Group Inc of structuring a CDO known as Abacus to benefit hedge fund investor John Paulson at the expense of other investors.
Goldman in July agreed to pay $550 million to settle that lawsuit, without admitting wrongdoing.
On Friday, a separate group of investors sued Credit Agricole SA in a New York state court. They accused the French bank of allowing a hedge fund to select poor assets to back two CDOs in which they invested, and did not disclose that the hedge fund was taking short positions.
The Morgan Stanley lawsuit seeks class-action status, actual and punitive damages, and other remedies.
The case is Dandong et al v. Pinnacle Performance Ltd et al, U.S. District Court, Southern District of New York, No. 10-08086.
(Reporting by Jonathan Stempel in New York; Editing by Phil Berlowitz)
