Hedge fund Harbinger Capital and its manager Philip Falcone reached a settlement in principle last month to settle with the SEC by agreeing to pay $18 million and have Falcone be banned from the securities industry for two years.  A transcript from the argument on the defendants’ motion to dismiss the SEC’s case, which was recently released on the public docket, sheds some light on the risks and benefits of proceeding with litigation. At the outset of the argument, Judge Crotty appeared sympathetic to the defendants’ argument that there is nothing manipulative or wrong with a “short squeeze” — buying up securities to “squeeze” short sellers into paying more to cover their shorts:

Continue Reading Transcript Shows Risks for Harbinger, Falcone in SEC Case

On Friday, hedge fund manager Philip Falcone filed two motions to dismiss SEC charges against him and his firm, Harbinger Capital.  (A prior post on the charges is here.)  One set of charges accuses Falcone of a “short squeeze” — buying up securities to “squeeze” short sellers into paying more to cover their shorts — and Falcone argues there is nothing fraudulent about that:

Continue Reading Falcone Says “So What” to SEC Allegations

Today Judge Nathan largely granted a series of dismissal motions in an investor lawsuit against Harbinger Capital and certain affiliates.   She summarized the case as follows:  “At core, Plaintiffs allege that Defendants marketed the Funds as diversified, distressed-debt and credit-driven hedge funds, but in fact used the Funds to take a large ownership interest in LightSquared”—a wireless broadband company—“without adequately disclosing this shift in strategy or its attendant risks.” Judge Nathan dismissed with prejudice all or part of seven of the lawsuit’s nine causes of action, including plaintiffs’ direct claims relating to LightSquared, and all derivative claims brought on behalf of  three of the six nominal defendants.

Continue Reading Judge Nathan Narrows Harbinger Investor Suit; Grants Plaintiffs Standing to Sue on Behalf of Funds in Which They Did Not Invest