US Fraud Lawsuit Against UBS Dismissed
A lawsuit against UBS alleging that the Swiss bank engaged in fraud related to holdings of a fund in loss-making company Endwave was dismissed by a New York Supreme Court judge, court documents showed.
The complaint claimed UBS was aware that Wood River Partners, a now-defunct hedge fund in which the plaintiffs invested and UBS was prime broker and custodian, owned a lot of Endwave stock, which triggered U.S. Securities and Exchange Commission reporting requirements.
The fund had not made the required reports, the complaint said, citing plaintiffs.
It alleged UBS did not make disclosures or withdraw as prime broker, but manipulated the Endwave market "to suit its own needs," and "artificially created a short market for Endwave stock, secretly borrowed from the fund's account, and caused the value of the Fund's portfolio to decrease."
Plaintiffs said the fund lost $20 million in face value due to Endwave, according to the document.
However, UBS said it was not directly accountable to the plaintiffs and moved to dismiss the complaint, which was filed in May 2007.
Judge Charles Ramos, of the Supreme Court of the state of New York - New York county, said in the document filed on July 23 that plaintiffs had failed to show that UBS was required to alert them about Wood River amassing Endwave stock and failing to make corresponding SEC filings.
"Plaintiffs merely assert that, by virtue of UBS's position as prime broker, clearing broker and custodian for the fund, UBS assumed a fiduciary duty to the plaintiffs, as limited partners. These allegations, without more, are not sufficient to establish the existence of a fiduciary relationship," the judge said.