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Portus fund investors needn't wait: judge

Bloomberg News

TORONTO -- Portus Alternative Asset Management Inc. customers who invested in the defunct hedge fund's Market Neutral Preservation Fund won't have to file bankruptcy claims to recover their money, a judge has ruled.

Mr. Justice Colin Campbell of the Ontario Superior Court said yesterday that the investors, who made deposits totalling $19.2-million, are entitled to their money now because the funds were separated from the rest of Portus's assets.

The judge is scheduled to rule March 24 on KPMG LLP's request to place Portus and its subsidiaries into bankruptcy. That would let a trustee liquidate the investments and distribute the money among eligible creditors.

Treating one group of creditors differently is unusual, the judge said.

"I would hope that the circumstances in which a claim such as that of the MNPF investors would arise would be infrequent," Judge Campbell said in his 18-page ruling.

Anyone objecting to the decision has 30 days to appeal.

Portus, founded in 2002 by Boaz Manor and Michael Mendelson, became one of the fastest-growing hedge funds in Canada, with about 26,000 customers investing almost $800-million, excluding the money in the preservation fund.

The Ontario Securities Commission sued Portus last March over questionable transactions. Judge Campbell ordered KPMG to seize Portus's assets and track down money that was moved out of Canada. KPMG estimated it had spent $7.8-million investigating the Portus transactions as of January.

© 2007 The Globe and Mail. All rights reserved.

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