District Court Dismisses Hedge Fund’s Fraud Suit Against Prime Broker for Lack of Reliance

On March 30, 2009, the U.S. District Court for the Southern District of New York dismissed a lawsuit brought by Walrus Master Fund Ltd. (WMF), a Cayman Island hedge fund, against its prime broker, Citigroup Global Markets, Inc., for its alleged violation of Section 4b of the Commodity Exchange Act, and violations under state law.  WMF, the court held, could not have acted in reliance upon the broker’s reports that WMF asserts were false given that the trading at issue occurred three days prior to WMF’s receipt of those reports.  We detail the background of the action and the court’s rationale for its dismissal of the fraud claim.

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