Andrew Cuomo (D)
NEW YORK (Legal Newsline) - New York Attorney General Andrew Cuomo is investigating whether credit default swaps are being used to devalue share prices, sources say.
Cuomo, who last week began probing short-selling abuses in the stock market, is now looking at the default swaps, which investors buy to protect themselves against defaults, Reuters reported Friday.
Officials in the attorney general's office want to know if credit default swaps were manipulated by short sellers through the use of false rumors about financial companies such as Lehman Brothers, Goldman Sachs Group Inc. and Morgan Stanley.
The Democratic attorney general has issued subpoenas to three market-data providers that produce reports on the price of credit default swaps. The firms reportedly subpoenaed are Markit Group Ltd, Depository Trust & Clearing Corp and Bloomberg LP.
Citing an unnamed source, Reuters reported that Cuomo's office believes the data providers can help identify parties engaging in swap transactions.
The attorney general's office is "examining whether these credit default swaps are being manipulated in a way to make the markets think a company is less healthy than it really is," Reuters' source said. "That's another potential form of spreading false rumors."
From Legal Newsline: Reach reporter Chris Rizo at chrisrizo@legalnewsline.com.