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Investors in Defunct Hedge Fund Sue UBS: WSJ

Investors in Wood River Partners have sued UBS, alleging the defunct hedge fund's prime broker fraudulently earned more than $100 million by misusing knowledge of its trades, the Wall Street Journal reported on its Web site on Wednesday.

The plaintiffs, who collectively invested $79 million in Wood River, allege in the lawsuit filed in a New York state court that UBS earned profits by selling borrowed shares in the fund's biggest single stock holding, Endwave , and helping other UBS clients do the same, the paper said.

The lawsuit claimed $200 million in damages, the paper said.

UBS could not be reached immediately. But the Journal quoted a spokeswoman as saying: "UBS intends to defend itself vigorously against these allegations."

Wood River collapsed in late 2005. Earlier this year, U.S. authorities charged its founder, John Whittier, with defrauding investors out of $88 million. Whittier has pleaded not guilty to the charges.

Prosecutors have said Whittier, the former co-head of media and telecoms equity research at Donaldson, Lufkin & Jenrette, amassed an 80% stake in Endwave, a small California telecoms company, between 2004 and 2005, but failed to disclose the holding either to investors or to the U.S. Securities and Exchange Commission.

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