Washington Mutual insider probe approved - Business News - IOL | Breaking News | South Africa News | World News | Sport | Business | Entertainment | IOL.co.za

Washington Mutual insider probe approved - Business News - IOL | Breaking News | South Africa News | World News | Sport | Business | Entertainment | IOL.co.za: "Washington Mutual shareholders have won a judge’s permission to question hedge funds about allegations that they used confidential information to trade in the bankrupt firm’s securities.

US Bankruptcy Judge Mary Walrath approved the investigation on Tuesday at a hearing in Wilmington, Delaware.

Authorising depositions and document subpoenas might be the only way to determine whether the hedge funds violated bankruptcy rules on insider trading, she said.

“The allegation that troubles the court is that you used that information to trade in the debtors’ securities,” Walrath told a lawyer for one of the four hedge funds. “I don’t know of anybody who feels that is proper.”

After Washington Mutual filed for bankruptcy in 2008, hedge funds bought debt securities, some for pennies on the dollar, issued by the bank holding company and its former banking unit, Washington Mutual Bank. The hedge funds then battled each other, shareholders, creditors, regulators and JPMorgan Chase, about how to divide the company’s assets."