SEC, Investor Flak Drives Nine MBS Hedge Funds To Ch. 11

Law360, New York (October 27, 2011, 8:03 PM EDT) -- Nine hedge funds managed by Commonwealth Advisors Inc. filed for bankruptcy Tuesday, facing litigation from angry investors and a regulatory investigation over a $675 million bet on mortgage-backed securities they made on the eve of the real estate market collapse.

In papers filed in Delaware bankruptcy court, the funds said Chapter 11 proceedings would allow them to liquidate about $81 million worth of client assets, $56 million of which is invested in a single collateralized debt obligation, one of the complex financial instruments used to securitize...
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