NEW YORK (Reuters) - A Connecticut court ordered UBS UBSN.VX to pledge assets or post a $35 million bond after finding “probable cause” that the bank committed securities fraud in a deal with Pursuit Partners, the hedge fund’s lawyers said on Wednesday.
Superior Court Judge John Blawie found probable cause that UBS used secret insider information obtained from its relationship with ratings agencies Moody’s (MCO.N) and Standard & Poor’s to commit securities fraud in the sale of collateralized debt obligation notes to Pursuit.
“The court takes UBS employees at their word when they referenced their Notes, these purported investment grade securities which they sold, as ‘crap’ and ‘vomit’, for UBS alone possessed the knowledge of what their product was truly worth,” lawyers for the plaintiff quoted the judge’s statement as saying.
The Court’s order was issued at the conclusion of a one-week hearing and took testimony of various UBS employees and reviewed documents, including internal UBS e-mails.
“The decision by the Connecticut Superior Court is a preliminary procedure to require defendants to post security while a case is pending, nothing more,” UBS said in a statement.
“The decision is not a decision on the merits or a prediction of the outcome of the case. UBS is confident that it will prevail on the merits of the case.”
Pursuit was represented by Burg Simpson Eldredge Hersh & Jardine.
Reporting by Yinka Adegoke; Editing by Dhara Ranasinghe