Shareholders of the Reserve Primary Fund who did not bail before the company froze redemptions earlier this week are suing. The lawsuit, filed Wednesday, seeks damages for investors who didn't redeem their shares of the money-market fund as of September 16, Bloomberg reports. According to the lawsuit (via Bloomberg), the fund "deviated from its stated investment objective by sacrificing preservation of capital and liquidity in pursuit of higher yields. This strategy was exemplified by the fund's disastrous and unreasonable concentration of $785 million face value in commercial paper issued by Lehman."
The Reserve Primary "broke the buck" Tuesday when its shares fell below $1. Once the fund crossed that threshold, its adviser halted redemptions as a flood of investors bolted, further exacerbating the fund's decline.
As of last Friday, the fund held $62.6 billion in assets, including $785 million in bonds issued by Lehman Brothers. The fund held about $23 billion in assets on Tuesday.