Thursday, April 15, 2010

Lehman may have grounds to sue Goldman, Barclays

Goldman Sachs Group, Inc.Lehman Brothers Holdings Inc may have grounds to sue Goldman Sachs Group Inc and Barclays Plc after they demanded $1.2 billion in additional margin to assume trading positions auctioned by a Chicago exchange, bankruptcy examiner Anton Valukas said.

Goldman Sachs was the high bidder for Lehman’s equity derivatives at options and futures exchange CME Group Inc, and took $445 million of those assets at a private auction in September 2008, according to previously censored details of Valukas’s March 11 report. Barclays was the high bidder for Lehman’s energy derivatives and took $707 million in assets from CME.

DRW Trading was the highest bidder for Lehman’s foreign exchange, agricultural and interest-rate derivatives, Valukas said. The transfer of $2 billion in Lehman deposits for its proprietary trades at the CME cost the defunct investment bank $1.2 billion, Valukas said, adding that CME also may be sued.

“The examiner concludes that an argument can be made that the transfers at issue were fraudulent transfers,” Valukas said in the report, released in its unredacted form yesterday. Under bankruptcy law, Lehman may be able to undo the auction, he said.

Part of Valukas’s job was to explore Lehman’s grounds for suing companies that contributed to, or benefitted unfairly from, the demise of the investment bank and its affiliates including the brokerage Lehman Brothers Inc., and to say which kinds of lawsuits are most likely to succeed and what the possible defenses are.
“Thus, LBI may have a colorable claim against CME, or any of the firms that bought LBI’s positions at a steep discount during the liquidation ordered by the CME, for the losses that LBI sustained as a result of the forced sale of house positions held for the benefit of LBI and its affiliates.

full story here
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