Insider Trading Allegations Fog Confirmation of Bankruptcy Plan

August 26, 2011 Betsy Lynch 0 Comments

Washington Mutual shareholders made closing arguments against the company’s $7 billion reorganization plan, accusing of insider trading and the negative effect it had on the company’s bankruptcy relief efforts.  Shareholders are upset because they will likely recover very little money through the reorganization plan the company proposed to the bankruptcy court.  “They accused four hedge funds of gleaning information from their role in negotiating the bankruptcy plan to generate profits trading Washington Mutual’s securities.” (from

If the Judge finds that insider trading allegations are accurate, the bankruptcy court could deny confirmation of the company’s plan for bad faith.  The company denies insider trading allegations and the court has yet to publish an opinion on the matter.

The bankruptcy was filed in 2008 after the savings and loan business failed, i.e. the biggest bank failure in U.S. history.  “If the plan of reorganization is approved, Washington Mutual’s only remaining operation, a small mortgage reinsurance business, will emerge from bankruptcy.” (Id.)

For more information, please see In re Washington Mutual Inc, U.S. Bankruptcy Court for the District of Delaware, No. 08-12229.

For more information on bankruptcy, please visit or contact your Kansas City Bankruptcy Lawyer, Betsy Lynch at 816.434.6616.

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