Merrill Lynch sued over CDOs and Hedge Fund Deals

Merrill Lynch was sued yesterday in the United States District Court for the Southern District of New York (SDNY). The plaintiffs in Kosseff v. Merrill Lynch & Co., Inc., et al. are seeking damages from the collapse of the CDO markets. The plaintiffs have named Merrill Lynch, Stan O’Neal (former CEO), Ahmass Fakahany (co-COO), Gregory Fleming (co-President and co-COO), and Jeffrey Edwards (CFO)as defendants.

The plaintiffs are seeking to certify a class of all Merrill Lynch shareholders from November 3, 2006 to November 2, 2007. They are seeking remedies under the Securities Act of 1934, sections 10(b), 20(a), and under Rule 10b-5.

The complaint quotes extensively from Wall Street Journal articles regarding the history of Merrill Lynch’s involvement in CDOs. It also quotes extensively from multiple SEC filings and Merrill Lynch Press Releases. The gravamen of the complaint is that Merrill Lynch misled its investors regarding the positions Merrill Lynch maintained before, during, and after the meltdown. The complaint specifically mentions a quote from a Wall Street Journal article, stating that Merrill Lynch “has engaged in deals with hedge funds that may have been designed to delay the day of reckoning.”

The lawsuit was filed by the law firm of Murray, Frank & Sailer LLP. According to their website, they are “a class action law firm located in the heart of New York City, specializes in representing institutions and individuals worldwide in class action litigation, particularly in cases involving violation of the securities laws, antitrust laws, consumer protection, and ERISA.”

If you’d like to read the whole complaint, it is available here.

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One Response to Merrill Lynch sued over CDOs and Hedge Fund Deals

  1. Christopher says:

    Question for your readers. How important is it, or should it be, in the subsequent course of litigation that the Wall Street Journal has retracted an important chunk of this story?

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