An adviser on investing in hedge funds cannot be sued for securities fraud for recommending a fund that later turned out to be a Ponzi scheme, the 2nd U.S. Circuit Court of Appeals has ruled in a closely watched case. The circuit found that the requirement of scienter was not met in the pleadings against an adviser who steered a client to Samuel Israel III and other founders of the Bayou funds group that later bilked investors out of more than $400 million.
July 16, 2009 at 12:00 AM
1 minute read
The original version of this story was published on Law.Com
An adviser on investing in hedge funds cannot be sued for securities fraud for recommending a fund that later turned out to be a Ponzi scheme, the 2nd U.S. Circuit Court of Appeals has ruled.
The circuit found that requirement of scienter was not met in the pleadings against an adviser who steered a client to Samuel Israel III and other founders of the Bayou funds group that later bilked investors out of more than $400 million.
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