A state judge reportedly ordered UBS AG to set aside more than $35 million as a potential award to Pursuit Partners L.L.C., a Stamford-based hedge fund that is suing UBS for allegedly selling it in 2007 debt securities that were on the cusp of being devalued.
UBS issued a statement to press outlets stating the ruling is a preliminary court action and the company is confident it will prevail in the case.
In its complaint, Pursuit alleges UBS sold collateralized debt obligations (CDO) to Pursuit in the summer of 2007, without disclosing that ratings agencies would likely downgrade the debt securities. The instruments soon defaulted and were rendered worthless.
CDOs were an underlying cause of the meltdown in the credit markets in 2008 and 2009, in many cases representing portions of debt on home mortgages that went into default as homeowners could not cover rising interest rates that kicked in under their contract terms.
Judge John Blawie cited an email from a UBS banker saying he had “sold more crap to Pursuit,” according to the Wall Street Journal, and the judge said there was sufficient evidence for UBS to post a $35.5 million bond in case Pursuit prevails in court.
UBS is among the largest employers in Fairfield County with a giant investment banking and trading operation in Stamford.
