Bear Stearns to repay millions to collapsed hedge fund

New York-based bank Bear Stearns has been ordered to repay at least $125.1 million to the collapsed Manhattan Investment hedge fund, for failing to report alleged fraud that could have cost investors up to $400 million.

The bank delayed for a year reporting the hedge fund’s overstating of its accounts, which went on for more than three years after its incorporation in 1996. In August 1999, the fund’s net value was stated at more than $426 million, but in reality it was worth less than $28 million, according to the Securities and Exchange Commission (SEC).

The hedge fund collapsed in 2000, when the SEC charged it with fraud and froze the assets of manager Michael Berger, who has fled the US.

The ruling was made by federal bankruptcy judge Burton Lifland in a New York court last week, who said: “Bear Stearns failed to act diligently in a timely manner.” The fund had 280 investors, and its creditors include Credit Suisse Group, Bank Austria and Republic National Bank New York. Bear Stearns plans to appeal the decision.