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Benedicte Gravrand, Opalesque Geneva: - A Florida federal judge dismissed an investor lawsuit alleging that Paulson & Co. had fail to notice red flags when one of its hedge funds, Paulson Advantage Plus L.P., bought a stake once worth $880m in Sino-Forest Corp, according to several reports yesterday.
An amended order was entered on March 31, 2013, granting Paulson's motion to dismiss the case, Reuters reported. The judge ruled that the investor did not have the standing to sue and claim a fiduciary relationship with Paulson.
Background
In June 2011, a research report by Carson Block of Muddy Waters Research made allegations that Sino-Forest, a commercial forest plantation operator in China listed in Canada, had been fraudulently inflating its assets and earnings, and that the company's shares were essentially worthless. Muddy Waters, which also shorted Sino-Forest shares, made the case that Sino-Forest was no more than a multi-billion dollar Ponzi scheme. Sino Forest’ share price subsequently plummeted by around 82%.
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