Liquidators of Investment Funds Sue DLA Piper

, New York Law Journal

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Liquidators of two investment funds are suing DLA Piper, claiming the firm helped the funds' investment manager misappropriate millions of dollars. The funds, called SCIF Funds, are in liquidation in the Cayman Islands. ICP Asset Management, founded by Thomas Priore, was investment manager to the funds and a client of DLA, according to ICP Strategic Credit Income v. DLA Piper, 654216-2013, which seeks $80 million in damages. Liquidators claim DLA helped ICP and Priore to misappropriate more than $36 million from funds to make payments owed by Triaxx Funding, another investment vehicle ICP managed. Triaxx was a collateralized debt obligation that bought and held residential mortgage-backed securities.

The suit in Manhattan Supreme Court claims Lucien White, of counsel at DLA, told Priore and ICP they could characterize money transfers from SCIF Funds as a loan, although he knew there was no agreement to repay the SCIF Funds.

The liquidators allege aiding and abetting breach of fiduciary duty, aiding and abetting fraud, and fraudulent trading against DLA. They filed suit last year against ICP, Priore and Triaxx. Both suits seek recovery of money for creditors, which are largely investors in the SCIF Funds, said William Reid IV, of Reid Collins & Tsai, attorney for the liquidators.

Gibson, Dunn & Crutcher partner Kevin Rosen, representing DLA, said in a statement that the law firm "strongly denies any wrongdoing and will vigorously defend itself against this lawsuit. DLA Piper did not represent the entities on whose behalf the joint official liquidators are suing, and we are not responsible for any injury they claim to have suffered."

Last year, the U.S. Securities and Exchange Commission announced that ICP and Priore agreed to settle charges that they defrauded several collateralized debt obligations they managed.

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