Galvin Probe Widens as Hub Investors Roar
By Jay Fitzgerald | Saturday, October 20, 2007
As Secretary of State William Galvin expands his probe into Bear Stearns’ alleged role in the subprime-mortgage fiasco, a New York attorney said he hopes to represent a number of Boston-area investors who claim they lost big bucks after two Bear Stearns hedge funds collapsed along with the subprime market.
A spokesman for Galvin, whose office oversees the securities industry in Massachusetts, confirmed yesterday that investigators are looking into what happened at the two now-defunct hedge funds that had heavily invested in mortgage-related securities.
Investigators are reportedly zeroing in on whether improper trades were made between Bear Stearns and its two in-house hedge funds, without telling investors.
Earlier this year, the two funds failed, costing investors $1.6 billion.
Galvin’s probe into the hedge funds, first detailed yesterday in the Wall Street Journal, is a significant expansion of the scope of his original investigation.
Last March, Galvin announced his office had subpoenaed documents from Bear Stearns and UBS Securities over their “positive” research reports about subprime lenders even though those lenders faced increasing defaults on subprime loans.
Meanwhile, securities attorney Jacob Zamansky, who says he represents 25 investors who lost money in the two Bear Stearns funds, told the Herald that he’s in contact with a number of affluent individual investors in the Boston area who lost money in the two hedge funds.
He said he may represent them in any arbitration proceedings against Bear Stearns, which he said “misrepresented” investors about the risky nature of the two hedge funds’ investment strategies.
A Bear Stearns spokesman could not be reached for comment.
But a spokesman told the Wall Street Journal that investors were made “very aware” of the risks involved.