There will more of this coming as things turn negative. This is also, in some ways, a response to the heads I win, tails you lose attitude some hedge funds have had towards their LPs. From Bloomberg
March 30 (Bloomberg) -- Amaranth Advisors LLC was sued by the San Diego County retirement fund for securities fraud, a step the hedge-fund firm said may delay refunds to clients hurt when it collapsed under $6.6 billion in losses in September.
Amaranth lied about trading strategies and made ``excessively risky and volatile investments,'' according to a complaint filed yesterday by the San Diego County Employees Retirement Association. Amaranth said fighting the lawsuit, the first tied to the largest-ever hedge-fund failure, will drain remaining assets earmarked for investors.
The San Diego fund accuses Amaranth of defrauding clients by misrepresenting itself as a fund that invested in many different assets, according to the complaint.
``The fund, against its own espoused investment policies, effectively operated as a single-strategy natural-gas fund that took very large and highly leveraged gambles and recklessly failed to apply even basic risk-management techniques and controls,'' the complaint says.