unexpected and unprecedented in their scale.
Given the size of the market failure, the numbers of investors whose
holdings became illiquid or who actually lost money, and the collapse of Lehman, the
sale of ARS by Lehrnan has been the subject of Investigation by various regulators and
governmental agencies including the United States Attorney’s Office for the Eastern
District of New York.
On or about January 17, Z’OOS, K&K, acting as counsel to Respondents,
filed the Statement of Claim that commenced the Arbitration on behalf of Respondents
against Lehman and Petitioners; thereafter, K&K twice amended the pleadings. The
Second Amended Statement of Claim, dated May 2, 2008, asserts various claims against
L e h a n and Petitioners in connection with Lehnm’s sale of ARS to Respondents,
iiicluding one count of securities fraud under Section lo@) and Rule 1O(b)(5) of the
Respondents allege they suffered damages in excess of $285 million when the auctions
for the ARS they purchased
failed and the ARS became illiquid.
Lehman and the
individual Petitioners have filed a Statement of Answer denying all claims. Copies of the
Second Amended Statement of Claim and Petitioners’ Statement of Answer thereto are
annexed as Exhibits A and B respectively.
On or about September
19, 2008, Lehman filed for bankruptcy which,
among other things, automatically stayed the Arbitration as against Lehman. In light of
these changed circumstances, Respondents considered whether to proceed with their
arbitration claims against the individual Petitioners and asked FINRA for time to make
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