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SEC Not to File Charges Against HF Over CDOs

Aug 07, 2013
Jing Chen

The Securities and Exchange Comission has decided to retract its recommendation of filing civil charges against hedge fund firm Magnetar Capital over its role in helping create mortgage securities that lost billions of dollars during the 2008 financial crisis.

The Wall Street Journal reported that there was not sufficient evidence to file charges against Magnetar on grounds that it violated federal law as a result of its influence “over the selection of assets bundled in one collateralized debt obligation (CDO).”

The article also said that Megnetar previously stated that it did not control the selection of assets in the CDOs it invested in, and that it didn’t bet against the housing market, however it has been reported that the firm invested about $1.5 billion in CDOs between 2006 to 2007, while betting approximately $3 billion that the deals would decline in value.

One reason SEC has decided not to move forward with the lawsuit may be because of the five-year statute-of-limitations deadline that is coming up.

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