Yahoo Finance Jefferies Asks Judge to Remove Managers of Weiss Multi-Strategy
(Bloomberg) -- Managers of Weiss Multi-Strategy Advisers are trying to use the company’s bankruptcy case to enrich themselves and should be replaced by a court-approved trustee, Jefferies Financial Group said in a court filing.
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The move comes days after Weiss filed for court protection and sued Jefferies in US bankruptcy court in Manhattan. The defunct hedge fund is seeking to recover $20 million, alleging the money either wrongly went to Jefferies over other creditors or was obtained under the threat of litigation. Jefferies has denied the allegations and said Weiss is acting in bad faith.
The dueling allegations will likely be decided in bankruptcy court in the coming months by US Judge Martin Glenn, who is overseeing the Chapter 11 case that Weiss filed on April 29, about two months after the hedge fund told investors it was shuttering and returning capital.
Jefferies said the case should be converted to a Chapter 7 bankruptcy so an independent trustee can liquidate any remaining Weiss assets and investigate the circumstances around the firm’s demise.
Weiss didn’t immediately respond to a request for comment on Jefferies’ filing.
Jefferies’ investment management affiliate, Leucadia Asset Management, is a major creditor in the bankruptcy. It’s owed $43 million in outstanding notes and about $52 million under the strategic partnership deal it has with Weiss.
A trustee would have the power in bankruptcy court to investigate actions Weiss management took in the months before filing Chapter 11, including its decision to pay $28 million in employee bonuses in February. Jefferies alleges Weiss management transferred millions in bonuses to themselves while the hedge fund was insolvent and has refused to explore clawing those payments back for the benefit of creditors.
Weiss has less than $50 million in assets but owes creditors as much as $500 million, according to its Chapter 11 petition, filed in federal court in Manhattan.
George Weiss founded his eponymous firm in 1978. As of December it managed $2.3 billion.
The case is Weiss Multi-Strategy Advisers LLC, 24-10743, US Bankruptcy Court for the Southern District of New York (Manhattan).
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