Hedge fund sues Wachovia and Citigroup

A small Florida hedge fund has filed separate lawsuits against Citigroup Inc. and Wachovia Corp. alleging that the firms improperly required the asset manager to pay out more money from credit default swaps in the midst of a towering drop in the value of mortgage-backed bonds, according to published reports. The suits were filed in U.S District Court in Manhattan by $58 million hedge fund manager VCG Special Opportunities Master Fund Ltd. (formerly CDO Plus Master Fund Ltd.) according to published reports. The Citigroup suit, filed Feb. 14, involved a credit-default-swap agreement where the New York-based bank bought $10 million of protection against a collateralized debt obligation backed by subprime-mortgage assets. In the other suit, VCG claimed they sold credit protection on a mortgage-related security to a unit of Wachovia last May, but in the ensuing weeks were asked to pay millions in collateral to the New York-based firm due to a deterioration in the credit market, published reports said. A Citigroup official described the suit as being “without merit” and Wachovia officials declined to comment according to published reports.