A $350 million lawsuit filed by American International Group accusing hedge fund Moore Capital Management of aiding in a complex fraud involving packages of mortgage-backed securities insured by AIG can go forward, a unanimous Appellate Division, First Department panel, ruled Tuesday. The order affirmed an August 2012 ruling by Manhattan Supreme Court Justice Jeffrey Oing (See Profile), who denied Moore's motion to dismiss.
AIG originally sued both Moore and ICP Asset Management, a financial services firm. It alleged ICP committed fraud in managing collateralized debt obligations, or CDOs, synthetic investment instruments based on revenue from mortgage-backed securities, and that Moore aided that fraud. Specifically, it said ICP agreed to buy MBSs from Moore as additional collateral for the CDOs at inflated prices, leaving AIG, as insurer, liable for large losses as the mortgage market tanked. AIG dropped its case against ICP in April after reaching a settlement.
