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To: RealMuLan who wrote (56798)	9/21/2006 8:27:18 PM
From: RealMuLan	Read Replies (1) \| Respond to of 116555

Amaranth braced for wave of lawsuits By Ben White in New York ft.com Published: September 21 2006 19:56 \| Last updated: September 21 2006 19:56 Hedge fund group Amaranth Advisors on Thursday prepared for a wave of lawsuits and investor demands for return of capital as it confirmed that losses had risen above $6bn. Amaranth set a conference call for today to update investors and said it would begin holding one-on-one meetings beginning next week. ADVERTISEMENT The move came as the Securities and Exchange Commission said it was tightening scrutiny of hedge funds by stepping up examination of their links with broker-dealers. In a letter to investors sent late on Wednesday, Amaranth said it had lost 65 per cent in its main multi-strategy funds this month. Amaranth lost 35 per cent on disastrous natural gas trades last week. Those losses deepened this week as the fund sold energy and other trading positions at a steep discount to meet margin calls and prevent forced liquidation by creditors. A large portion of Amaranth’s capital came from funds of hedge funds, vehicles whose investors include pension funds, endowments and many middle to upper middle class investors. Funds of hedge funds run by Morgan Stanley, Goldman Sachs, Credit Suisse and Bank of New York all had stakes in Amaranth. Public and private pension funds, including the states of New Jersey and Pennsylvania, San Diego County and manufacturer 3M also had small stakes. Amaranth investors could file lawsuits claiming they were misled verbally or through documents about the amount of concentrated risk the fund was taking. Multi-strategy hedge funds are supposed to avoid massive losses in any one asset class. Prominent white-collar law firm Skadden, Arps on Thursday said it was representing Amaranth, indicating the fund was preparing for a legal battle. Investors could also claim that Amaranth failed properly to supervise trader Brian Hunter who made the losing natural gas bets. Mr Hunter joined Amaranth after an acrimonious split from former employer Deutsche Bank. Mr Hunter filed suit against Deutsche Bank in 2004 for alleged breach of contract, failure to pay a bonus in 2002 and 2003, and failure to accelerate vesting of his equity awards upon his departure. Deutsche Bank has denied most of the allegations but said it did not pay Mr Hunter a bonus in 2003. In its letter to investors on Wednesday, Amaranth said September 18 was the last day to submit requests to take money out for the October 31 quarter. That was the same day that Amaranth disclosed the 35 per cent trading loss. That could leave Amaranth open to claims that it knew about the losses before September 18 but did not disclose them to avoid massive redemptions. Additional reporting by Anuj Gangahar and Deborah Brewster Copyright The Financial Times Limited 2006