ADCB launches legal action over collapsed US investment

LEGAL BID: ADCB is suing five US companies over a failed investment. (Getty Images)

Abu Dhabi Commercial Bank (ADCB) is suing five US companies, including Morgan Stanley, for fraud over an investment vehicle which failed during the global credit crunch.

The UAE-based bank alleges Morgan Stanley & Co, Bank of New York Mellon Corp and three securities ratings firms rated a Cheyne structured investment vehicle too highly, newswire Bloomberg reported on Tuesday.

In a lawsuit filed in Manhattan district court, ADCB is seeking unspecified money damages on behalf of everyone who invested in the vehicle launched by Cheyne Finance Plc from October 2004 to October 2007, the newswire said.

SIVs used short-term funding, such as asset-backed commercial paper, to buy longer-term assets such as bank debt and asset-backed securities

The financial instruments ADCB purchased are now worth zero, the lawsuit said.

Also named as defendants in the lawsuit are two units of the New York-based credit ratings firm Moody's Corp, and the Standard & Poor's Ratings Services.

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Should we be worried?
Posted by Karl, Dubai on Wednesday 27 August 2008 at 08:24 UAE time

Without knowing how much the lawsuit is for, we don't know how concerned or unconcerned about ADCBs future we should be. Is this the tip of the iceberg? Will we see other UAE banks follow? Here's me thinking that the regional banks were unaffected by the sub-prime crisis?

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