In a move that shook the foundation of financial litigation, the Second Circuit turned the tables last Thursday, dismissing allegations against JPMorgan Chase and its banking consortium. They were under fire for allegedly keeping noteholders in the dark about lending to a company dancing on the edge of bankruptcy.
JPMorgan’s Syndicated Loan : The Crux of the Controversy
The staggering $1.8 billion syndicated loan, likened to the heartbeat of this high-profile case, was meant to bolster the operations of Millennium Health LLC Inc., a urine drug testing company.
But as the winds changed, Mark Kirschner, the bankruptcy trustee, emerged from the shadows wielding state securities laws like a sword.
He contended that the banks should have sounded the alarm bells, warning noteholders of the lurking storm that was about to engulf Millennium.
Yet, in a plot twist that could rival any courtroom drama, the Second Circuit delivered a verdict: the syndicated loan didn’t wear the cloak of a security.
