(CN) - The 2nd Circuit reinstated a lawsuit accusing Banc of America Securities of aiding and abetting the mismanagement of two now-liquidated hedge funds, OmniFund and Lancer Offshore.
Investors claimed that Banc of America Securities, as prime broker of the funds, knew that hedge fund manager Michael Lauer was falsifying the values of the funds' holdings on investor reports.
As a result, Lauer was able to conceal huge losses that began as early as March 2000, according to the plaintiffs.
U.S. District Judge Shira Sheindlin threw out the lawsuit after determining that it failed to show how Banc of America Securities was responsible for investors' losses.
Judge Leval of the New York-based appeals court took a different view, saying the complaint contained more than mere "conclusory assertions."
"Rather, the complaint plausibly and in adequate detail set forth allegations" that the defendant knowingly put false information in reports published in its name, Leval wrote.
The court vacated dismissal of the case and remanded for further proceedings.
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