Investors in Bear Stearns Cos. hedge funds that were virtually wiped out from large bets on risky mortgages are planning to sue the company as early as Monday, television channel CNBC reported on Friday.

The lawsuit will be brought by the firm of Bernstein Litowitz Berger and Grossman LLP, which represented investors against WorldCom Inc. over a massive accounting fraud, CNBC said.

…

Legal experts have said the losses in the Bear funds are so large that litigation is almost inevitable.

But they say plaintiffs could have a tough time proving their case. Because the funds were aimed at sophisticated investors such as institutions and wealthy clients, it could be hard to argue that the risks were not properly understood.

I think it’s safe to say that anyone who knowingly invested in a hedge fund that funded high-risk mortgages knew thre was a substantial risk of losing all their money. Because these investors were mostly institutions and wealthy clients, it will be hard to prove that they didn’t know there was a huge risk in that market.

Heck, I am neither an institution nor wealthy and I know the risks of such an investment.

One Response to “Investors Took Risks. Suing Because They Lost.”