Nov 16 The U.S. Securities and Exchange
Commission has dropped its civil lawsuit against a former
executive of GSC Capital Corp who was accused of negligence for
helping mislead investors on a JPMorgan Chase & Co
The SEC's decision to drop the case against Edward
Steffelin, a former managing director at GSC Capital Corp, was
disclosed in a court filing Friday in U.S. District Court in
"Our duty in all cases is to achieve a just and appropriate
outcome," SEC spokesman John Nester said. "Our decision here
appropriately reflects information that came to light as the
Steffelin was the sole individual charged when JPMorgan
agreed to a $153.6 million civil settlement last year and one of
the few people hit with a SEC lawsuit related to pre-recession
mortgage investments gone bad.
Steffelin had been in charge of a team at GSC that selected
the investment portfolio for a $1.1 billion collateralized debt
obligation called Squared CDO 2007-1, which JPMorgan structured.
The SEC alleged that Steffelin knew the hedge fund Magnetar
Capital LLC helped choose some of the assets being included in
the CDO. Magnetar had a bet against the securities, the SEC
The SEC accused Steffelin of failing to ensure marketing
materials for the deal disclosed the involvement of Magnetar.
Steffelin denied wrongdoing.
Alex Lipman, a lawyer for Steffelin, said the SEC staff
notified him in May that they would recommend to the SEC's
commissioners to dismiss the case. The SEC decided to drop the
case after exchanging evidence, Lipman said.
"Often times in that situation the people on other side just
ignore it," he said. "But to their credit, they kept an open
The dismissal of the lawsuit against Steffelin came as the
SEC announced JPMorgan Chase had agreed to another settlement, a
$296.9 million deal stemming from its role putting together
No individuals were charged Friday, and few people have
faced litigation in the SEC's financial crisis cases against the
The SEC also lost its first financial-crisis trial against
an individual when a jury ruled in favor of former Citigroup Inc
mid-tier executive Brian Stoker.
The case is U.S. Securities and Exchange Commission v.
Steffelin, U.S. District court, Southern District of New York,