SEC Eyes Hedge Fund Activity On Bankruptcy Panels

Law360, New York (February 2, 2006, 12:00 AM EST) -- A move by the U.S. Securities and Exchange Commission against a hedge fund manager who served on WorldCom’s creditors committee may herald a crackdown against perceived fraud and abuse of insider information gleaned from bankruptcy proceedings, bankruptcy experts say.

In December of last year, the SEC unofficially began an investigation into the participation of hedge funds in bankruptcy proceedings, concerned that some fund managers may be overstating their bond holdings in troubled companies in order to secure spots on creditors committees.

The investigation was opened just...
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