Court Cases Regarding Derivatives

Lehman Subordination Case to Continue in U.S. Bankruptcy Court


On August 11, 2009, Judge James Peck of the Federal bankruptcy court in New York denied a motion by a unit of The Bank of New York Mellon Corp. (“BNYM”) to dismiss an action by a subsidiary of Lehman Brothers Holdings Inc. relating to the priority of claims in connection with credit-linked notes (“CLNs”) issued by a program known as “Dante”. The Lehman subsidiary had entered into credit default swaps relating to the CLNs and claims that it is owed $70 million in connection with their early termination. The BNYM unit acted as trustee under the Dante program. READ MORE

SEC Brings First Insider Trading Case Involving Credit Default Swaps


On May 5, 2009, the Securities and Exchange Commission (the “SEC”) charged a portfolio manager at hedge fund investment advisor Millennium Partners L.P. (“Millennium”) and a bond and credit default swap (“CDS”) salesman at Deutsche Bank Securities Inc. (“DBSI”) with insider trading in CDS. The SEC’s complaint alleges that the DBSI salesman became privy, through his employment at DBSI, to confidential information concerning the restructuring of an upcoming bond issuance by VNU N.V. (“VNU”), a Dutch media holding company, and passed that information on to a Millennium portfolio manager, who traded based on that information. READ MORE