2008-11-12 — cnn.com
A state judge has ruled that a lawsuit by collapsed hedge fund Amaranth Advisors LLC can proceed against JPMorgan Chase & Co. (JPM) over the bank allegedly undercutting the fund's efforts to avoid collapse after a series of bad natural-gas trades in 2006.
In an order dated Oct. 28 and filed publicly on Monday, New York State Supreme Court Justice Richard B. Lowe III in Manhattan ruled that a breach-of-contract claim can proceed against JPMorgan, but dismissed five other causes of actions against the bank.
In its lawsuit filed last November, Amaranth had alleged JPMorgan used its position as Amaranth's clearing broker to prevent the hedge fund from transferring the remaining risk in its natural-gas derivatives portfolio to Goldman Sachs Group Inc. (GS) and later made false statements to kill a deal with Citadel Investment Group LLC. The judge dismissed the claims related to false statements allegedly made by JPMorgan to Citadel.
The lawsuit alleges JPMorgan wanted to take control of the natural-gas portfolio itself in hopes of making substantial profits and the fund suffered several hundred million dollars of additional market losses on Sept. 18, 2006, as a result of JPMorgan's refusal to execute the transaction.
JPMorgan ultimately entered into a trade with Amaranth and then a subsequent agreement with a Citadel affiliate, pocketing $725 million, according to the lawsuit.
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